The risk that the auditors' own procedures will lead to the decision that material misstatements do not exist in the financial statements when in fact such misstatements do exist is
A) Audit risk.
B) Inherent risk.
C) Control risk.
D) Detection risk.

Question

Quizplus · Accepted Answer

This is an example of detection risk, which is the risk that the auditors' procedures will not detect material misstatements that exist in the financial statements. It is one of the components of audit risk, which also includes inherent risk (risk related to the nature of the entity and its environment) and control risk (risk related to the effectiveness of the entity's internal controls). However, this specific scenario describes the risk of not detecting misstatements, which falls under detection risk.

The Risk That the Auditors' Own Procedures Will Lead to the Decision