If risk of material misstatement is set at high, what should detection risk be set to?
Detection risk has an inverse relationship with the assessed risk of material misstatements (Inherent risk X control risk). Therefore, if risk of material misstatement is high, then detection risk would be set to low.
Since detection risk is to low, that means that the acceptable level of risk is low, and the audit team should perform a higher amount of substantive testing procedures.
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