Suppose auditors assess inherent risk and control risk as low, 25% and 8% respectively.If auditors want to keep audit risk relatively low at 5%, then what is detection risk?
A)2.50 or 250%
B).02 or 2%
C).05 or 5%
D)2.00 or 200%

Question

Quizplus · Accepted Answer

Detection risk is calculated as follows:Detection risk = Audit risk / (Inherent risk x Control risk)Detection risk = 5% / (25% x 8%)Detection risk = 5% / 2%Detection risk = 2.50 or 250%

Suppose Auditors Assess Inherent Risk and Control Risk as Low