What is detection risk?
Detection risk is the risk that the auditor will not detect a material misstatement that exists in a relevant assertion. Unlike inherent and control risks, detection risk is will not exist independently of the audit.
Therefore, the assessed level of detection risk (amount of work the auditor will need to do) will be determined based on the assessed level of inherent and control risk. Detection risk is the only risk that the audit team has control over.
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Audit risk is the risk that the auditor will fail to modify an opinion on the financial statements when they are in fact materially misstated. This will typically arise because an auditor will never be able to obtain absolute assurance by conducting audit procedures. Audit risk will only be able to be reduced to an […]
What is inherent risk in an audit?
Inherent risk is the susceptibility of a relevant assertion to a material misstatement, assuming no internal controls exist. The auditor will assess inherent risk as high if the financial statements are likely to contain material misstatements and will assess inherent risk as low if the financial statements are not likely to contain material misstatements. Some […]