The risk that an auditor will conclude,based on substantive procedures,that a material error does not exist in an account balance when,in fact,such an error does exist is referred to as
A) Sampling risk.
B) Detection risk.
C) Nonsampling risk.
D) Inherent risk.

Question

Quizplus · Accepted Answer

Detection risk is the risk that the auditor will not detect a material misstatement that exists. When the auditor concludes, based on substantive procedures, that a material error does not exist in an account balance when in fact such an error does exist, this means that the auditor has failed to detect a material misstatement. Therefore, the risk associated with this situation is detection risk. Sampling risk refers to the risk that the sample selected for testing is not representative of the population as a whole, while inherent risk refers to the risk that exists in the population independent of the audit. Nonsampling risk relates to the risk of making an incorrect conclusion regardless of the sampling method used.

The Risk That an Auditor Will Conclude,based on Substantive Procedures,that