1. In which of the following situations would an auditor most likely assess control risk as high?

A. Substantive procedures alone are unlikely to reduce audit risk to a sufficiently low level.

B. Test of controls reveals that the internal controls are not operating effectively.

Required: Answer in the space below:

i. Which of the two options (A or B) is correct.

ii. Why the response selected is correct.

iii. Why the response not selected is incorrect.