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During the preliminary evaluation of the cash receipts and payments system of Nawton Co the auditor ascertains that a bank reconciliation is prepared on a monthly basis by the cashier and is passed to the chief accountant, but there is no evidence of review. Other controls in this area appear to be adequate and the auditor has requested confirmation of year-end balances from the bank. If possible, the auditor would like to maximise reliance upon controls. In view of this, what is the likely impact of the evaluation on the planned audit work for the receipts and payments system? A. No reliance on any controls, substantive testing only. B. Maximum reliance on all controls, following tests of controls, subject to a satisfactory compensating substantive test on missing control; maximum reduction in extent of other substantive testing. C. Maximum reliance on all controls, following tests of controls and maximum reduction in extent of substantive testing. D. Moderate reliance on all controls, following tests of controls and moderate reduction in extent of substantive testing. |