Based on audit evidence gathered and evaluated, an auditor decides to increase the assessed level of control risk from that originally planned. To achieve an overall audit risk level that is substantially the same as the planned audit risk level, the auditor would
A) increase materiality levels.
B) decrease detection risk.
C) decrease substantive testing.
D) increase inherent risk.

Question

Quizplus · Accepted Answer

If the assessed level of control risk is increased, it means that the auditor has determined that the controls in place are less reliable or effective than originally anticipated. To still achieve the same planned audit risk level, the auditor will need to lower detection risk (the risk of failing to detect a material misstatement) by increasing the amount of substantive testing performed. This will compensate for the increased risk of material misstatements that may exist due to weaker controls. Therefore, B is the correct choice. A would not be appropriate because increasing materiality would increase the risk of not detecting a material misstatement. C would also be inappropriate because decreasing substantive testing would increase the risk of not detecting a material misstatement. D would be counterintuitive because increasing inherent risk would mean that the auditor believes that the subject matter being audited is inherently more susceptible to material misstatement, and therefore would increase audit risk.

Based on Audit Evidence Gathered and Evaluated, an Auditor Decides