Question

IC are weak; no reliance on IC, use substantive tests as the main source of evidence; CR high so DR low.

A) Control risk
B) Detection risk
C) Inherent risk
D) Audit risk

Answer 1

The question relates to audit risk, specifically the high control risk due to weak internal controls, leading to lower detection risk. Option A) Control risk is the correct answer.

Step-by-step explanation:

The question is asking which type of audit risk component is being described. The statement refers to a scenario where internal controls (IC) are weak, suggesting that a higher degree of reliance will be on substantive testing rather than on the effectiveness of internal controls.

Therefore, control risk is high, meaning there's a higher likelihood that the company's internal controls won't prevent or detect a misstatement. This leads to a lower detection risk, which is the risk that the auditors themselves will fail to catch these misstatements during their substantive procedures. In this context, the best answer would be A) Control risk.