Angela is an audit manager in a medium-sized firm of chartered accountants. For many years she has carefully considered the audit risk model in her testing. When controls have been good, she has tested them and subsequently reduced her reliance on substantive testing. However, the corporate collapses of recent years have caused her to question this approach. From her reading of the financial press it is her understanding that many of these collapses have resulted from inadequate auditing of items on the income statement. This has made her re-evaluate her audit approach. In future, her audits will be based mainly on substantive testing with a focus on the income statement and her only evaluation of controls will be associated with the requirement to obtain an understanding.

Required

Discuss the appropriateness of this ‘new’ approach to auditing by the audit manager.