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Detection risk in auditing – meaning

Detection risk is the risk that the procedures performed by the auditor to reduce audit risk to an acceptably low level will not detect a misstatement that exists and that could be material, either individually or when aggregated with other misstatements.

Detection risk arises because of poor audit planning and failure to select the right sample to test. The detection risk unlike other audit risks (control risk and inherent risk) is managed by the auditor through proper audit planning and execution.

If the auditor assesses the control risk and inherent risk to be high, the auditor will increase his sample and perform more substantive procedures in order to minimize the detection risk. In another hand, if the auditor assesses the inherent risk and control risk (also called the risk of material misstatement)  to be low then he may reduce the sample and perform less substantive procedures.

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