Assume the preliminary audit strategy was based on a planned assessed level of control risk at a low level. Based on the final assessed level of control risk, the auditor would need to move substantive tests from interim to year-end and increase the extent of tests of details in order to accommodate a lower acceptable level of detection risk if:
A) the final assessed level of control risk was moderate or high.
B) the final assessed level of control risk was low or very low.
C) the final assessed level of inherent risk was high or very high.
D) the final assessed level of inherent risk was low or very low.
E) the final assessed level of analytical procedures risk was moderate of high.

Question

Quizplus · Accepted Answer

If the final assessed level of control risk is moderate or high, it indicates that the controls are not as effective as initially thought. Therefore, the auditor would need to perform more substantive tests at year-end rather than interim and increase the extent of tests of details to lower the acceptable level of detection risk. This is because a higher control risk means the auditor cannot rely as much on the controls to prevent or detect material misstatements, necessitating more extensive substantive testing.

Assume the Preliminary Audit Strategy Was Based on a Planned