Which of the following statements is ?
A) If detection risk is high, significant substantive procedures are necessary to reduce detection risk.
B) There is an inverse relation between the auditor's assessed risk of material misstatement and detection risk.
C) There is no relation between the auditor's assessed risk of material misstatement and detection risk.
D) If detection risk is low, only a small number of substantive procedures are necessary to reduce the detection risk.

Question

Quizplus · Accepted Answer

According to auditing standards, there is an inverse relationship between the auditor's assessed risk of material misstatement and detection risk. This means that if the auditor assesses the risk of material misstatement as high, they need to reduce detection risk by performing more substantive procedures. On the other hand, if the auditor assesses the risk of material misstatement as low, they can potentially reduce the level of substantive procedures to manage detection risk. Therefore, option B is the correct statement. Option A and D are incorrect because they suggest that high and low detection risk, respectively, can alone determine the extent of substantive procedures. Option C is incorrect because it contradicts auditing standards.

Which of the Following Statements Is