The risk of material misstatement differs from detection risk in that it
A) Arises from the misapplication of auditing procedures.
B) May be assessed in either quantitative or qualitative terms.
C) Exists independently of the actions of the auditor.
D) Can be changed at the auditor's discretion.

Question

Quizplus · Accepted Answer

The risk of material misstatement exists independently of the actions of the auditor and is related to the risk that there are material misstatements in the financial statements that have not been detected and corrected by the client's internal controls. Detection risk, on the other hand, is related to the risk that the auditor's procedures will not detect a material misstatement if it exists. The auditor can change detection risk by altering their audit procedures, but they cannot change the risk of material misstatement. Choice A is incorrect because material misstatements may not arise from the misapplication of auditing procedures. Choice B is incorrect because the risk of material misstatement is typically assessed only in qualitative terms. Choice D is incorrect because it is detection risk that can be changed at the auditor's discretion.

The Risk of Material Misstatement Differs from Detection Risk in That