If the auditor determines that internal controls are not functioning as designed, and a compensating control does not exist, the auditor will assess control risk and the risk of material misstatement (RMM) as_______.
A)high and set detection risk as low
B)low and set detection risk as low
C)high and set detection risk as high
D)low and set detection risk as high

Question

Quizplus · Accepted Answer

If the auditor determines that internal controls are not functioning as designed and a compensating control does not exist, there is a high risk of material misstatement. Therefore, the auditor will assess control risk and RMM as high and set detection risk as low to ensure sufficient testing is performed to detect any material misstatements in the financial statements.

If the Auditor Determines That Internal Controls Are Not Functioning