Suzy and Harry, audit managers assigned to the audit of Old Dominion Enterprises, are discussing how the nature, timing, and extent of audit procedures may be different when the risk of material misstatement has been assessed to be high versus low for an account balance. Which of the following statements most accurately describes the differences in the nature, timing, and extent of audit procedures for accounts with high versus low risk of material misstatement?

Group of answer choices

Generally accepted auditing standards require that when an auditor assesses the risk of material misstatement as high, the auditor perform additional substantive testing procedures on the client's system of internal control, including substantive tests of details.

When the risk of material misstatement is assessed as low by the auditors, a greater reliance is typically placed on the client's system of internal controls. Because greater reliance is placed in this area, there is no need or requirement for the auditor to adjust the nature, extent or timing of audit procedures.

When the risk of material misstatement is assessed as low by the auditors, the auditor is more likely to adopt a reliance strategy with respect to the client's internal controls. The auditor is likely to also increase substantive tests of details before issuing an audit opinion.

When the risk of material misstatement is assessed as high by the auditors, the auditor is less likely to rely on the client's controls. The auditor is also more likely to perform more substantive procedures before forming an opinion on the financial statements.