You have just completed Phase I of your audit of accounts receivable, which is a material account for your client. You now have an understanding of the design of internal controls for that account. You are about to test those controls. You have evaluated inherent risk for this account at 60%. The desired level of audit risk for this account has been set at 6%. Based on your understanding of the design of the control system, if controls are operating as designed, there is a 70% chance that controls will prevent or detect material misstatements, but of course, you can only rely on controls to the extent that you test them.
Choose a level of control risk and a level of detection risk that, in combination, will provide you with exactly the desired level of audit risk, that is consistent with the above facts, and that complies with professional standards.