7-45. Assume that you have been hired by Willington, CPA, as a new staft assistant. He inform you that his approeh to audils has always becn to assess control risk at the maximum abd per. form all the substantive prucedures he considers necessary. However, ha has recently nedi an article in The Journd of Accountancy that indicates that a more efficied audit may sombtibe be achieveli by performing some tests of controls sud thercby assessing control risk at a lower level. Willington shows you the following table that came from the aricle: Willington understands that the table is only for illusiralive purposes and that other "i bctween" levels of the various risks are possible, but he wants you to ase the ones in ble table to help hin nderstand the tralic offs between tests of controIs and substarive proct:dures. He understands that these risks would be assessed at the assertion level for the wartous accounts, but he wants to berter understand how the various tests performed in an aadil "tic together." To keep things simple, he says to assume that inherent risk is at the muxiam level in all cases. He has roughed out a tabie that he wants you to complete for the following three cases: Controls, as descrifed by ranagement, appear strong, and Willington wishes to test then to the exient possible. In this case, he realizes that the results of the tests of controls nuy deveal that the controls are not operating effectively. Accorvingly, Case A has three subcuses: A(1) Controls are found to be strong and operate effectively. A(2) Controis are found to operate roderately effectively. A(3) Controls, despite rnanagement's description, are found to be incffective. Controls, as described by managerment, appear strong, but Willington wishes to use his old approach of not testing them. Controls, as described by management, appear weak. Internof Contral Fill out the chart on the following page using the following reply options. 7-45. Assume that you have been hired by Willington, CPA, as a new staft assistant. He inform you that his approeh to audils has always becn to assess control risk at the maximum abd per. form all the substantive prucedures he considers necessary. However, ha has recently nedi an article in The Journd of Accountancy that indicates that a more efficied audit may sombtibe be achieveli by performing some tests of controls sud thercby assessing control risk at a lower level. Willington shows you the following table that came from the aricle: Willington understands that the table is only for illusiralive purposes and that other "i bctween" levels of the various risks are possible, but he wants you to ase the ones in ble table to help hin nderstand the tralic offs between tests of controIs and substarive proct:dures. He understands that these risks would be assessed at the assertion level for the wartous accounts, but he wants to berter understand how the various tests performed in an aadil "tic together." To keep things simple, he says to assume that inherent risk is at the muxiam level in all cases. He has roughed out a tabie that he wants you to complete for the following three cases: Controls, as descrifed by ranagement, appear strong, and Willington wishes to test then to the exient possible. In this case, he realizes that the results of the tests of controls nuy deveal that the controls are not operating effectively. Accorvingly, Case A has three subcuses: A(1) Controls are found to be strong and operate effectively. A(2) Controis are found to operate roderately effectively. A(3) Controls, despite rnanagement's description, are found to be incffective. Controls, as described by managerment, appear strong, but Willington wishes to use his old approach of not testing them. Controls, as described by management, appear weak. Internof Contral Fill out the chart on the following page using the following reply options