Assessed control risk and acceptable risk of assessing control risk too low (ARO)are directly related; that is, as assessed control risk increased, ARO also increases.

Question

Quizplus · Accepted Answer

This statement is true. As assessed control risk increases, it means that the auditor has determined there is a higher risk of material misstatement in the financial statements. If the auditor were to assess control risk too low, this would increase the likelihood of not detecting a material misstatement and increase the acceptable risk of assessing control risk too low. Therefore, the two risks are directly related.

Assessed Control Risk and Acceptable Risk of Assessing Control Risk