Detection risk
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Detection risk
Detection risk
Detection risk relates to the nature, timing and extent of the auditor’s procedures that are determined by the auditor to reduce audit risk to an acceptably low level.
Compliance audit
Financial audit
Planning
Ref: 14.160
Page Content
Definition
Detection risk, which is under the control of the auditor, is the risk that (s)he will not detect a deviation that has not been corrected by the entity's
internal controls
.
Instructions
Based on the level of
audit risk
that is acceptable, and an assessment of the entity's
inherent
and
control risks
, the auditor determines the nature, timing and extent of audit procedures necessary to achieve the resulting detection risk. For example:
if a lower audit risk is required, detection risk can be reduced by carrying out more
substantive procedures
, as this affords a greater probability that the auditor will detect material misstatements or irregularities.
if intending to place reliance on internal control,
tests of controls
must be carried out. If the control does not function as intended (thus increasing control risk), detection risk must be decreased, meaning an increase in substantive procedures.
Related documents
Standards
ISA 200
Definition
Instructions
Last Modified
: 28/03/2020 00:05
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