Control Risk Assessments: Do They Relate to Errors?

The article informs that the Auditing Standards Board has issued an exposure draft concerning the assessment of control risk, including consideration of the control environment, the accounting system, and control procedures as key elements of entities' control structures. A total of 75 operational variables for control structure elements are tested by correlating these variables to total error rates and errors at the account level. With respect to total error interrelationships, over one-half of the measures tied to the control environment were significantly related to the incidence of error. Seventy percent of the accounting system measures and 100 percent of the control procedures at an aggregate level are strongly associated with error.