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A material weakness in the entity's controls over journal entries is identified at planning. The auditor's response is to:
AIncrease substantive testing of journal entries, particularly non-standard year-end entries
BReduce sample size due to weak controls
CSkip controls testing entirely
DSign report with no modification
Answer & Solution
Correct answer: A. Increase substantive testing of journal entries, particularly non-standard year-end entries
1. Weak journal-entry controls inflate inherent and detection risk for fraud.
2. SA 240 specifically requires unpredictable testing of journal entries when fraud risk exists.
3. Reducing sample or skipping testing is opposite of the required response.
_Source: ICAI BoS CA Final Paper 3, Ch 2 "Audit Planning Strategy and Execution"_
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