The auditors assessed risk of material misstatement at 0.50 and said they wanted to achieve a 0.05 risk of failing to express a correct opinion on financial statements that were materially misstated.What detection risk do the auditors plan to use for planning the remainder of the audit work?
A) 0.20.
B) 0.10.
C) 0.75.
D) 0.00.

Question

Quizplus · Accepted Answer

The auditors need to reduce the overall risk of expressing an incorrect opinion to 0.05, which is achieved by multiplying inherent risk (0.50) with detection risk (x). Therefore, detection risk needs to be set at 0.10 (0.50 x 0.10 = 0.05).

The Auditors Assessed Risk of Material Misstatement at 0