This is the end of the preview. Sign up to access the rest of the document. Unformatted text preview: Describe the relationship between detection risk and audit risk. 1. Audit risk is the possibility that the auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated.
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Where the auditor's assessment of inherent and control risk is high, the detection risk is set at a lower level to keep the audit risk at an acceptable level. Lower detection risk may be achieved by increasing the sample size for audit testing.
http://accounting-simplified.com/audit/risk-assessment/audit-risk.html
2. Detection risk is the risk that the auditors' procedures will lead them to conclude that a material misstatement does not exist in an assertion when in fact such misstatement does exist 3. AR = IR * CR * DR Problem 5.1 Kom verder. Saxion. Identify and describe the two components of the risk of material misstatement.
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Audit risk. (Redirected from Detection Risk) Audit risk (also referred to as residual risk) refers to the risk that an auditor may issue an unqualified report due to the auditor's failure to detect material misstatement either due to error or fraud. This risk is composed of inherent risk (IR), control risk (CR) and detection risk (DR), and can be calculated thus:
https://en.wikipedia.org/wiki/Detection_Risk
Detection Risk. What is 'Detection Risk'. Detection risk is the chance that an auditor will not find material misstatements relating to an assertion in an entity's financial statements through substantive tests and analysis. Detection risk is the risk that the auditor will conclude that no material errors are present when in fact there are.
http://www.investopedia.com/terms/d/detection-risk.asp
Auditing Standard No. 12, Identifying and Assessing Risks of Material Misstatement, indicates that the auditor should assess the risks of material misstatement at two levels: (1) at the financial statement level and (2) at the assertion 4/ level.
https://pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_8.aspx
Inherent Risk is the risk of a material misstatement in the financial statements arising due to error or omission as a result of factors other than the failure of controls (factors that may cause a misstatement due to absence or lapse of controls are considered separately in the assessment of control risk).
http://accounting-simplified.com/audit/risk-assessment/audit-risk.html
Detection Risk is the risk that the auditors fail to detect a material misstatement in the financial statements. An auditor must apply audit procedures to detect material misstatements in the financial statements whether due to fraud or error.
http://accounting-simplified.com/audit/risk-assessment/audit-risk.html
The auditor uses the assessed risk of material misstatement to determine the appropriate level of detection risk for a financial statement assertion. The higher the risk of material misstatement, the lower the level of detection risk needs to be in order to reduce audit risk to an appropriately low level.
https://pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_8.aspx
In an audit of financial statements, audit risk is the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated, i.e., the financial statements are not presented fairly in conformity with the applicable financial reporting framework.
https://pcaobus.org/Standards/Auditing/Pages/Auditing_Standard_8.aspx
detection risk
Detection risk is the chance that an auditor will not find material misstatements relating to an assertion in an entity's financial statements through substantive tests and analysis.