When there is a low risk of material misstatement with an assertion and the client's system of internal controls is considered effective at reducing risk, ________.
A)detection risk is set at low
B)detection risk is set at high
C)inherent risk is set to medium
D)control risk is ignored

Question

Quizplus · Accepted Answer

When there is a low risk of material misstatement with an assertion and the client's system of internal controls is considered effective at reducing risk, auditors can afford to accept a higher detection risk. This means they can reduce the extent of substantive testing since the risk of not detecting a material misstatement through audit procedures is compensated by the low inherent and control risks.

When There Is a Low Risk of Material Misstatement with an Assertion