An auditor uses the assessed level of control risk to:

Question

Quizplus · Accepted Answer

Choice "D" is correct. An auditor uses the assessed level of control risk to determine the risk of material misstatement, which in turn determines the acceptable level of detection risk for financial statement assertions. Detection risk should bear an inverse relationship to control risk. For example, the less control risk an auditor believes exists, the greater the level of detection risk he or she can accept. Choice "A" is incorrect. The auditor's evaluation of the effectiveness of the entity's internal control is what the auditor uses to assess control risk, not vice versa. Choice "B" is incorrect. Inherent risk, which is the susceptibility of an assertion to a material misstatement based upon the nature of the account balance or transaction class, exists independently from and bears no direct relationship to control risk. Choice "C" is incorrect. Materiality thresholds for planning and evaluation purposes are based upon measurements of financial criteria, not the assessed level of control risk.

An Auditor Uses the Assessed Level of Control Risk To