Which of the following statements is correct regarding the relationship of the auditor’s understanding and assessment of the business risk associated with a client and the auditor’s management of audit risk through the audit risk model?

I. A client with high risks will generally lead the auditor to set audit risk at a low level.

II. The auditor’s assessment of residual risk is directly related to the nature of direct tests the auditor performs to reduce detection risk.

III. Analytical procedures are effective in reducing the auditor’s control risk assessment.

a. I and II above

b. I and II above

c. I, II, and III above

d. II only