The auditor's assessment of control risk and the extent of tests of controls are inversely related; that is, if the auditor's assessment of control risk decreases, more extensive tests of controls are applied.

Question

Quizplus · Accepted Answer

This statement is true according to the audit risk model, which states that audit risk equals inherent risk multiplied by control risk multiplied by detection risk. As the auditor's assessment of control risk decreases, the overall audit risk decreases, which means that detection risk must also decrease to achieve a lower level of audit risk. This can be accomplished by performing more extensive tests of controls to obtain a higher level of assurance that the controls are operating effectively.

The Auditor's Assessment of Control Risk and the Extent of Tests