Planned detection risk
/What is Planned Detection Risk?
Planned detection risk is the risk that audit evidence will fail to detect misstatements that exceed a tolerable amount. When an auditor reduces the planned detection risk, this will require the collection of more evidence. Conversely, if the auditor increases the planned risk, this will require the collection of less evidence.
The level of planned detection risk is inversely related to the levels of control risk and inherent risk. Thus, if these other two risks are high, then the level of planned detection risk must be reduced (which requires the gathering of more substantive evidence). Conversely, a decline in these other risks can lead an auditor to accept a higher planned detection risk, thereby reducing the amount of substantive evidence that must be collected.
Related AccountingTools Courses
FAQs
Is Planned Detection Risk the Same for all Audit Areas?
Planned Detection Risk is not the same for all audit areas, because each account balance and assertion may have different levels of inherent and control risks. Auditors adjust planned detection risk for specific areas based on factors like materiality, complexity, and susceptibility to misstatement. This means some accounts require more rigorous testing than others to keep overall audit risk at an acceptable level.