In short
Detection risk is the risk that the auditor's procedures will fail to detect a material misstatement that exists.
Key takeaways
- It is the only component of audit risk the auditor controls, through the nature, timing and extent of procedures.
- The higher the risk of material misstatement, the lower the detection risk the auditor can accept.
- It can never be reduced to zero.
Where it's tested
AUD: Assessing Risk of Material Misstatement — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A client operates with weak segregation of duties over its cash disbursement process. All else equal, how should the auditor respond?