The COSO internal control framework provides guidance to management to reduce residual risk to an acceptable level.

Question:

The COSO internal control framework provides guidance to management to reduce residual risk to an acceptable level.

Required
a. Define the term "residual risk."
b. Should residual risk be determined by:
• Management
• The external auditor
• The audit committee
• A regulatory body such as the PCAOB
c. What factors affect the auditor's assessment of residual risk remaining in an account balance before the auditor performs direct tests of the account balance?