In the annual audit of the financial statements of a company with high inherent risk and a very strong control system, the external auditor may be able to allow detection risk to rise because.
A) Audit risk has been reduced.
B) Control risk has been assessed at a lower level.
C) The company's operations are very susceptible to misstatements.
D) Whenever inherent risk is high, control risk is disregarded.

Question

Quizplus · Accepted Answer

A strong control system allows the auditor to assess control risk at a lower level, which means detection risk can be allowed to rise while still maintaining an acceptable level of overall audit risk.

In the Annual Audit of the Financial Statements of a Company