When deciding on the acceptable risk of assessing control risk too low, the auditor needs to:
A) rely on his/her professional judgment.
B) err on the side of conservatism.
C) consult the professional standards.
D) follow SEC guidelines.

Question

Quizplus · Accepted Answer

The auditor needs to rely on his or her professional judgment when deciding on the acceptable risk of assessing control risk too low. This requires considering various factors such as the nature and complexity of the business, the effectiveness of the client's internal control systems, and the risk of material misstatement in the financial statements. It is important for the auditor to exercise professional skepticism and use sound judgment in evaluating these factors. While consulting professional standards and following SEC guidelines can provide valuable guidance, they should not be relied on blindly without considering the unique circumstances of each audit engagement. Erring on the side of conservatism may lead to over-auditing and unnecessary costs for the client.

When Deciding on the Acceptable Risk of Assessing Control Risk