A new audit assistant at the accounting firm of Greentique and Partners was reviewing the planning strategy for her first audit. She could see that there was a very low inherent risk and control risk for the audit. The company had a very good system of internal control in place, and a large amount of audit work was performed to place reliance on those controls.

However, she could not understand why there was still a large amount of substantive testing performed in the audit. From her review of the past year’s file, she thought there should be no substantive testing. When she raised this issue with Mr Greentique, the audit partner, he suggested that the substantive tests were performed because “We can’t completely rely on internal controls — it would be too risky! The lawyers would have a field day if we were sued!’.

Required

Is either of these two people right? Discuss.