In an audit of a non-public company, the auditor's assessment of control risk and the extent of tests of controls are inversely related.

Question

Quizplus · Accepted Answer

This is true because if the auditor assesses control risk as low, meaning that internal controls are effective in preventing or detecting material misstatements, then they will perform less extensive tests of controls. On the other hand, if the auditor assesses control risk as high, meaning that there is a higher risk of material misstatements due to weak internal controls, then the auditor will need to perform more extensive tests of controls to ensure the accuracy of financial statements.

In an Audit of a Non-Public Company, the Auditor's Assessment