As a result of tests of controls, an auditor incorrectly assessed control risk too low and decreased substantive testing. This assessment occurred because the true deviation rate in the population was:
A)more than the risk of assessing control risk too low based on the auditor's sample.
B)more than the deviation rate in the auditor's sample.
C)less than the risk of assessing control risk too low based on the auditor's sample.
D)less than the deviation rate in the auditor's sample.

Question

Quizplus · Accepted Answer

The true deviation rate in the population being more than the deviation rate in the auditor's sample would lead the auditor to incorrectly assess control risk as too low, as they would not have captured the true extent of deviations in their sample. This underestimation would then lead to a decrease in substantive testing based on the incorrect assumption that controls are more effective than they actually are.

As a Result of Tests of Controls, an Auditor Incorrectly