Acceptable audit risk and planned detection risk are inversely related; i.e., as acceptable audit risk increases, planned detection risk should decrease, ceteris paribus.

Question

Quizplus · Accepted Answer

Acceptable audit risk and planned detection risk are not inversely related in this manner. Instead, as the acceptable audit risk decreases (meaning the auditor wants to take on less risk that the financial statements are materially misstated), the planned detection risk would decrease as well, leading the auditor to perform more substantive testing to ensure the financial statements are accurate.

Acceptable Audit Risk and Planned Detection Risk Are Inversely Related;