Detection risk
Detection Risk (DR) is the risk that the auditor will not detect a misstatement that exists in an assertion that could be material, either individually or when aggregated with other misstatements.[1] In other words, the chance that the auditor will not find material misstatements relating to an assertion in the financial statements through substantive test and analysis.[2] Detection risk results in the auditor's conclusion that no material errors are present where in fact there are. It is a component of audit risk.
Detection Risk and quality of audit have an inverse relationship: if detection risk is too high, the lower the quality of the audit and if detection risk is low, generally the quality of the audit increases.
References
[edit]- ^ ISA 200 Objectives and General Principles governing audit of Financial Statements.
- ^ Staff, Investopedia (14 August 2010). "Detection Risk". Retrieved 14 November 2017.