When the audit team increases the planned assessed level of control risk because certain control activities were determined to be ineffective,the audit team would most likely increase the
A) Extent of substantive tests of details.
B) Level of inherent risk.
C) Extent of tests of controls.
D) Level of detection risk.

Question

Quizplus · Accepted Answer

When the audit team increases the planned assessed level of control risk, it means that they believe the controls in place are not effective in preventing or detecting material misstatements. Therefore, the audit team would need to perform more extensive substantive tests of details to obtain sufficient evidence about the accuracy and completeness of the account balances or transactions. This is because the substantive tests of details are designed to directly test the materiality of the account balance or transaction and are used when the control risk is assessed as high. The other options are not appropriate because increasing the level of inherent risk would assume that there is a greater likelihood of material misstatements occurring in the account balance or transaction due to factors outside the entity's control, and increasing the extent of tests of controls would not be useful if the control activities are already determined to be ineffective. Finally, increasing the level of detection risk would increase the risk of the auditor failing to detect material misstatements and would not be an appropriate response.

When the Audit Team Increases the Planned Assessed Level of Control