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

Question

Quizplus · Accepted Answer

Choice "C" is correct. As the assessed level of control risk increases, the acceptable level of detection risk for financial statement assertions decreases. To attain a decreased level of detection risk, greater assurance is needed from substantive tests. Increasing the extent of tests will provide greater assurance. Choice "A" is incorrect. Tests of controls are used to assess the level of control risk. Once such assessment is made, there is no need to perform further tests of controls. Choice "B" is incorrect. As the assessed level of control risk increases, the acceptable level of detection risk decreases. In this way, the auditor can keep total audit risk to an acceptable level. Choice "D" is incorrect. Inherent risk is based on the nature of the assertion and cannot be changed.

When an Auditor Increases the Assessed Level of Control Risk