C is corrent because the purpose of substantive tests is to obtain evidence as to the validity and the propriety of accounting treatment of transactions and balances or, conversely, of errors or irregularities. Thus, the auditor relies on substantive tests to minimize the risk of failure to detect material misstatements which occur in the accounting process.
A is incorrect because the question presumes the existence of a breakdown in internal control. Without this presumed breakdown in internal control, material errors in the accounting process would not occur.
B is incorrect because the auditor may or may not choose to use a statistical approach in the substantive tests which are performed.
D is incorrect because tests of controls provide assurance that the internal control procedures are operating as prescribed. Tests of controls do not directly test account balances and, therefore, would not be relied on to minimize the risk of failure to detect material misstatements which occur in the accounting process.
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