1. Auditors are required to obtain a sufficient understanding of an entity's internal control. This understanding is required by the performance principle of GAAS.

A. What is the impact on substantive testing procedures if the auditor assesses control risk at the "maximum" level? What is the impact on substantive testing procedures if the auditor assesses control risk below the "maximum" level?

B. What constitutes a material weakness? What is the difference between a significant deficiency and a material weakness?

C. What are some of the problems in establishing an internal control system in small business?