When an auditor increases the assessed level of control risk because certain control activities were determined to be ineffective, the auditor most likely would increase the:

Question

Quizplus · Accepted Answer

Choice "B" is correct. An increase in the assessed level of control risk means that the assessed risk of material misstatement has also increased, and this requires a corresponding decrease in detection risk to maintain the same (presumably low) level of overall audit risk. Increasing the extent of tests of details will result in a reduction in detection risk. Choice "A" is incorrect. Increasing detection risk would result in a corresponding increase in overall audit risk, which is the opposite of the desired response. Choice "C" is incorrect. The auditor cannot change the level of inherent risk, which is based on the nature of the related assertion. Choice "D" is incorrect. If the auditor has already determined that certain control activities are ineffective, increasing the extent of those tests is not likely to be helpful. The auditor needs to find a way to compensate for the increased level of risk in order to keep overall audit risk to a low level.

When an Auditor Increases the Assessed Level of Control Risk