If control risk can be assessed below the maximum and detection risk above the minimum for some assertions, which statement best describes the substantive tests for accounts payable?

• A. The auditor is more apt to confirm payable balances.
• B. The auditor is less apt to perform substantive tests at the balance sheet date.
• C. The auditor is more apt to increase the extent of substantive tests.
• D. The auditor is more apt to ignore the risk of incorrect acceptance when sampling accounts payable.

Answer: (B)

The extent of substantive testing is guided by how the audit risk model links control risk and detection risk to the desired level of overall audit risk. If control risk is assessed below maximum, it means internal controls are more reliable than initially assumed, so there is a lower chance that misstatements slip through controls. If detection risk is allowed to be above minimum, the auditor is comfortable with a higher chance that substantive procedures may not catch all misstatements, so the amount of substantive testing can be reduced. Taken together, this leads to planning less extensive substantive tests for accounts payable, particularly at the balance sheet date, because the stronger controls are expected to catch errors and the auditor is accepting a greater level of detection risk. Other options would imply more testing or relying less on controls, which isn’t indicated by the given risk assessments.