When controls are effectively designed, the auditor assesses control risk:
A) results in additional tests of controls being conducted.
B) at a reduced level, as the controls are effective.
C) at a level that reflects the effectiveness of those controls.
D) all of the above

Question

Quizplus · Accepted Answer

When controls are effectively designed, the auditor assesses control risk at a level that reflects the effectiveness of those controls. This means that the auditor believes the controls are designed well enough to prevent or detect material misstatements, and therefore the auditor can rely on them to reduce their substantive testing. However, the auditor still needs to assess the level of control risk based on the specific design and implementation of the controls, as well as their operating effectiveness, which may require additional tests of controls to be conducted. The fact that controls are effective does not necessarily mean that control risk is reduced or that additional tests of controls are necessary. Therefore, options A and B are incorrect.

When Controls Are Effectively Designed, the Auditor Assesses Control Risk