If the auditor assesses control risk dealing with account balances as being weak,the effect on residual risk is to

Question

Quizplus · Accepted Answer

When the auditor assesses control risk as weak for account balances, it means that there is a higher likelihood of material misstatements occurring in the account balances. Thus, the residual risk (i.e., the risk that remains even after the auditor's testing of controls and substantive procedures) will also increase. It is important to note that the answer could be A or B, depending on the presence or absence of significant deficiencies. If there are no significant deficiencies in the system of internal controls, then the auditor may be able to rely on substantive procedures to reduce residual risk, and the answer would be A. However, if there are significant deficiencies, then the answer would likely be B.

If the Auditor Assesses Control Risk Dealing with Account Balances