Detection risk refers to the likelihood that an auditor will not detect a material misstatement in a financial statement. It is a crucial component of audit risk that auditors must assess while evaluating the effectiveness of an audit process.

Detection Risk

Detection risk

A material misstatement in financial reporting refers to an error or omission that is significant enough to potentially influence the economic decisions of users relying on those reports. It is a critical concern for auditors, as identifying such misstatements is essential for ensuring the accuracy and reliability of financial statements.

material misstatement

financial statement

Audit risk is the risk that an auditor may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated. It is a critical consideration in the audit process, as it influences the nature, timing, and extent of audit procedures performed by the auditor.

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