Question

Control risk is most likely to be assessed at a level below the maximum when?

A) No tests of controls have been performed.
B) Tests of controls have been performed.
C) Externally generated evidence supports management's contentions relating to internal control.
D) The results of the consideration of internal control suggest that controls are not operating effectively.

Answer 1

Control risk is most likely to be assessed below the maximum when externally generated evidence supports management's contentions relating to internal control.

Step-by-step explanation:

Control risk is most likely to be assessed at a level below the maximum when externally generated evidence supports management's contentions relating to internal control. This means that there is evidence from an authoritative source that confirms the effectiveness of the internal controls in place. In such cases, the risk of errors or fraud due to control deficiencies is considered to be low.