What are the four options that clients have for responding to process risks? For risks that clients have chosen to reduce, how should the auditor adjust risk assessments based on the perceived effectiveness of the mechanisms utilized to reduce the risk (e.g., if the client implements a control activity, how should the effects of the control be depicted on the risk assessment diagram depicted in Figure 7-7)?

Figure 7-7

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High PR8 SPR5 PR1 Magnitude of Risk Outcome PR2 PR10 PR9 Legend: PR1: Lack of personnel PR2: Excess personnel PR3: Employment discrimination PR4: Excess recruiting costs PR5: Errors in payroll authorizations PR6: Errors in payroll processing PR7: Poor morale PR8: Illegal employment practices PR9: Inadequate training PR10: Loss of critical personnel PR3 Low PR6 PR7 PR4 Low High Likelihood of Risk