Final answer:
If internal controls are strong, the auditor can usually assess control risk as low. The correct answer is option 1 .
Step-by-step explanation:
If internal controls are strong, the auditor can usually assess control risk as low. This is because strong internal controls reduce the risk of material misstatements in the financial statements, which leads to a lower assessment of control risk. Strong internal controls provide reasonable assurance that the organization's objectives will be achieved and that financial statements are reliable and accurate.
For example, if a company has strong internal controls over its inventory management, the auditor can rely on the controls to ensure that inventory is accurately recorded and valued. The auditor can then assess control risk as low, meaning that they can reduce the amount of substantive testing they need to perform on inventory balances.
However, strong internal controls do not eliminate the need for testing altogether. While the auditor can rely on the controls and assess control risk as low, they still need to perform some testing to ensure the controls are operating effectively. This testing can include procedures such as inquiries, observation, and inspection of documentation.
Therefore, the correct option is 1) the auditor can usually assess control risk as low.