Auditors can affect control risk by management changing internal controls.

Auditors can affect control risk by management changing internal controls.

• A. It cannot be affected by management actions.
• B. Management can affect it by changing internal controls.
• C. It is determined solely by organizational structure.
• D. It is independent of any internal changes.

Answer: (B)

Control risk reflects the possibility that internal controls fail to prevent or detect a material misstatement. It depends on how management designs and operates those controls. When management changes internal controls, they change how effectively those controls function, so control risk moves accordingly. Strengthening controls lowers control risk; weakening controls raises it. Auditors adjust their procedures based on the assessed level of control risk, so changes initiated by management directly influence the audit approach. The other statements imply control risk is fixed or unrelated to internal changes, which isn’t accurate because internal controls are designed and modified by management and that directly affects how much risk remains.

Control risk reflects the possibility that internal controls fail to prevent or detect a material misstatement. It depends on how management designs and operates those controls. When management changes internal controls, they change how effectively those controls function, so control risk moves accordingly. Strengthening controls lowers control risk; weakening controls raises it. Auditors adjust their procedures based on the assessed level of control risk, so changes initiated by management directly influence the audit approach. The other statements imply control risk is fixed or unrelated to internal changes, which isn’t accurate because internal controls are designed and modified by management and that directly affects how much risk remains.