Detection Risk
 |
Definition of 'Detection Risk'The chance that an auditor will not find material misstatements relating to an assertion in an entity's financial statements through substantive tests and analysis. Detection risk is the risk that the auditor will conclude that no material errors are present when in fact there are. Detection risk is one of the three elements that comprise audit risk, the other two being inherent risk and control risk. |
 |
Investopedia explains 'Detection Risk'Exhaustive substantive tests and analysis may reduce the level of detection risk. Detection risk also depends on the quality of the auditors - the lower the quality of the auditor, generally the higher the detection risk. Detection risk may also be higher in regions where regulatory bodies are relatively ineffective. |
Related Definitions
Articles Of Interest
-
12 Things You Need To Know About Financial Statements
Discover how to keep score of companies to increase your chances of choosing a winner. -
How To Avoid Falling Prey To The Next Madoff Scam
Due diligence does work, but the loose reporting standards for hedge funds make extra care and attention necessary. -
Depreciation: Straight-Line Vs. Double-Declining Methods
Appreciate the different methods used to describe how book value is "used up". -
Financial Statement: Extraordinary Vs. Nonrecurring Items
When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ... -
Get A Career In Showbiz Accounting
An accounting career doesn't have to be boring. If you love numbers, but want excitement as well, consider the field of showbiz accounting. -
What Management Accountants Do
If you like keeping track of a company's income and expenses but also want to hold a position with significant responsibility and authority, management accounting could be the job for you. -
GAAP And The IFRS Standards Convergence Efforts In 3 Substantial Areas
Understand the specific steps that have been taken in hopes of converging the GAAP and the IFRS accounting standards, despite the philosophically and culturally based methodological differences ... -
Using The Price-To-Book Ratio To Evaluate Companies
The P/B ratio can be an easy way to determine a company's value, but it isn't magic! -
Small Business: Speed Up Receivables To Avoid A Cash Crunch
Waiting for customers to pay can be a losing game. Look to factoring for quicker cash. -
The Impact Of Combining The U.S. GAAP And IFRS
The convergence of accounting standards is changing the attitudes of CPAs and CFOs toward harmonization of international accounting.
Free Annual Reports
