Detection Risk (DR) is the risk that the

auditor An auditor is a person or a firm appointed by a company to execute an audit.Practical Auditing, Kul Narsingh Shrestha, 2012, Nabin Prakashan, Nepal To act as an auditor, a person should be certified by the regulatory authority of accounting an ...

will not detect a misstatement that exists in an assertion that could be

material A material is a matter, substance or mixture of substances that constitutes an Physical object, object. Materials can be pure or impure, living or non-living matter. Materials can be classified on the basis of their physical property, physical ...

, either individually or when aggregated with other misstatements. In other words, the chance that the auditor will not find material misstatements relating to an assertion in the financial statements through substantive test and analysis. Detection risk results in the auditor's conclusion that no material errors are present where in fact there are. It is a component of

audit risk Audit risk (also referred to as residual risk) as per International Standards on Auditing , ISA 200 refers to the risk that the auditor expresses an inappropriate opinion when the financial statements are materiality misstated. This risk is comp ...

. Detection Risk and quality of audit have an

inverse relationship In statistics, there is a negative relationship or inverse relationship between two variables if higher values of one variable tend to be associated with lower values of the other. A negative relationship between two variables usually implies that ...

: if detection risk is too high, the lower the quality of the audit and if detection risk is low, generally the quality of the audit increases.

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See also