An auditor determines that management integrity is high, the risk of account misstatements is low, and the client’s information system is reliable. Which of the following conclusions can be reached regarding the need to perform direct tests of account balances?
a. Direct tests should be limited to material account balances, and the extent of testing should be sufficient to corroborate the auditor’s assessment of low risk.
b. Direct tests of account balances are not needed.
c. Direct tests of account balances are necessary if audit risk was set at a low level, but are not necessary if audit risk was set at a high level.
d. Direct tests should be performed on all account balances to independently verify the correctness of the financial statements.