Holding other planning considerations equal, a decrease in the number of misstatements in a class of transactions that an auditor could tolerate most likely would cause the auditor to
A. Apply the planned substantive tests prior to the balance sheet date.
B. Perform the planned auditing procedures closer to the balance sheet date.
C. Increase the assessed level of control risk for relevant financial statement assertions.
D. Decrease the extent of auditing procedures to be applied to the class of transactions.
Answer: B
When the level of tolerable misstatements decreases, the auditor will have to increase substantive testing to ensure that all material misstatements are detected. Performing the planned auditing procedures closer to the balance sheet date increases the effectiveness of substantive procedures and thus increases substantive testing.
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Soooooo, why does planning auditing procedures closer to the balance sheet date increase the effectiveness of substantive procedures?