CMA Study Group

Inherent risk is inversely related to planned detection risk and directly related to planned evidence.

Dear Murari Balachandran,

As per my idea second one is correct

Inherent risk is positively related to planned detection risk and not at all related to planned evidence.

Thanks

riyaz basha abdul

The correct answer is: Inherent risk is inversely related to planned detection risk and directly related to planned evidence.

Because the more the inherent risk is get high, the more the evidence the auditor need to check in order to mitigate the impact of inherent risk.

Hope this will help you

Thanks alot  for this question ...

Inherent risk is inversely related to planned detection risk and directly related to planned evidence

Audit Risk (AR) is the risk that the auditor will conclude that everything is working properly when i fact, it is not working correctly.. and is made up of three components:

AR = Inherent Risk x Control Risk x Detection Risk

Therefore, the higher the inherent risk, the lower the detection risk should be.

My answer is D.  Inherent risk is inversely related to planned detection risk and directly related to planned evidence. Mr. Quan Long in correct in his reason = more planned evidences is required if the inherent risk is high, so to lower the detection risk. But the answer chosen in incorrect

I agree with Margie. I believe D is the correct answer here, following the formula on Audit Risk.

Inherent risk is the probability of material misstatement of an assertion, assuming no related internal control, and assessed using various analytical techniques. Detection risk, on the other hand, is the likelihood that an auditor's procedures will still lead to incorrect/improper conclusion that no material misstatement exists in an assertion although such actually exists. As auditor, you will primarily rely on substantive procedures (like evidence gathering) to limit this type of audit risk. Therefore, Both inherent risk and planned audit evidence are inversely related to detection risk.