By assessing control risk as high, an auditor will adopt a predominantly substantive approach.

When this audit strategy is

adopted, an auditor will gain the minimum necessary knowledge of client's system of internal controls as required by auditing
standards (ASA 315, ISA 315). If client's system of internal controls is non-existent, very poor or unlikely to be effective in
mitigating an identified inherent risk, there is generally no point testing the internal control as the auditor will not be planning
on relying on them. Instead, the auditor will increase their level of reliance on detailed substantive procedures, which
involves intensive testing of year-end account balances and transactions throughout the year.
When assessing control risk as low, an auditor will generally obtain a detailed understanding of client's system of internal
controls as they plan to rely on that system to identify, prevent and detect material misstatements. Once the auditor has
gained a detailed understanding, they will conduct extensive tests of those controls. When the costs of testing controls
exceeds the benefits, the auditor may decide not to test their client's internal controls. For low-risk clients, if tests of controls
are conducted and found to be effective, the auditor will plan on reducing their reliance on detailed substantive testing of
transactions and account balances. However, the auditor can never completely rely on client's system of internal controls and
will always conduct some substantive procedures to gather independent evidence regarding to the numbers appearing in the
client's FR.
If the auditor tests the controls and believes them to be ineffective, the auditor cannot rely on the controls, and reports the
weaknesses identified to those charged with governance, makes recommendations on improving the controls and increases
the reliance placed on detailed substantive procedures.

1. WALK THROUGH
Tracing a transaction through a client's accounting system

2. MATERIALITY
Materiality is defined as follows: ‘Misstatements, including omissions, are considered to be material if they, individually or
in the aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.’