Question

Which of the following components of the audit risk model is most closely associated with attributes sampling?

1) Inherent risk
2) Control risk
3) Detection risk
4) Risk of material misstatement

Answer 1

Control risk is associated with attributes sampling, as it involves testing the effectiveness of an organization's internal controls. Auditors use attributes sampling to determine if controls can prevent or detect errors, directly affecting the control risk assessment in the audit risk model.

Step-by-step explanation:

The element of the audit risk model that is most closely associated with attributes sampling is Control risk. Attributes sampling is a technique used by auditors to test the effectiveness of controls in an organization's internal control system. The purpose of attributes sampling is to determine whether controls are operating effectively and that they can be relied upon to prevent or detect errors in the transactions or balances.

Here's a brief explanation of the components in the audit risk model:

• Inherent risk is the susceptibility of an assertion to a material misstatement, assuming there are no related controls.
• Control risk is the risk that a material misstatement will not be prevented or detected on a timely basis by the entity’s internal control system.
• Detection risk is the risk that the auditor’s procedures will not detect a material misstatement.
• The Risk of material misstatement is the combined inherent and control risks.

When conducting attributes sampling, auditors are primarily evaluating control risk. If controls are found to be ineffective, auditors will then assess a higher control risk within the audit risk model, which may result in more extensive substantive testing.