Detection risk refers to
A) the susceptibility of an assertion to a material misstatement, assuming there are no related controls.
B) the risk that the auditor's testing procedures will not be effective in detecting a material misstatement.
C) the risk that a client's system of internal controls will not prevent or detect a material misstatement.
D) none of the above

Question

Quizplus · Accepted Answer

Detection risk refers to the risk that the auditor's testing procedures will not be effective in detecting a material misstatement. It is one of the components of audit risk, along with inherent risk and control risk. In other words, even if there are material misstatements or errors in the financial statements, the auditor may fail to detect them due to inadequate testing procedures or sampling techniques. The auditor can mitigate detection risk by properly planning and executing audit procedures, including selecting appropriate samples, testing controls, and performing substantive analytical procedures.

Detection Risk Refers to