Detection Risk Is the Risk That the Auditor Will Not

question 12

Multiple Choice

Detection risk is the risk that the auditor will not detect material misstatements in the accounts.To limit detection risk to an acceptable level, the auditor

• A)Performs substantive tests.
• B)Tests controls.
• C)Gains an understanding of the internal control system.
• D)Applies statistical methods.

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Definitions:

Debit Balance

A situation where the sum of debits in an account exceeds the sum of credits, often indicating the amount owed or expenses.

Bank Reconciliation

The process of matching and comparing figures from accounting records against those shown on a bank statement.

Check Amount

The total sum of money written on a check that is payable to the recipient.

Book Balance

The balance in a company's accounting records for a particular account, which may differ from the actual cash balance until reconciled.