Mr Docile asks you to come into his office so that he can plan the audit of DMC with you. He says all you need to do is see if you can prove the assets listed by Mr Diffident. If you cannot, then you should ask the office manager for guidance. You ask about controls and Mr Docile replies; I know it is in the manual but no auditor has been sued successfully for not studying the controls.

You decide to tell Mr Docile about how control based audits can reduce audit costs and lessen the risk of being sued. You decide to draft a memo about modern audit attitudes to controls and the audit risk model. You also plan to mention case law to prove that his statement about being sued is not correct.

Question 5

Required:

Draft a memo to Mr Docile setting out the requirements of the auditing standards regarding controls and how the Audit Risk Model works. In your answer, point to the case law that shows an auditor can be sued over controls.