[MrsCPA80]

Hello, I am hoping someone can help me better understand what is the relationship betweein detection and inherent risk. Is there a direct or an inverse relationship between these two??

[Anonymous]

There is an inverse relationship between RMM (risk of mat. missstatement) and detection risk. Since RMM equals Inherent risk times control risk, I assume that you can say that there is an inverse relationship between inverse and detection risk as well. (Audit 3 in Becker)

[jeff]

There is an inverse relationship.

If RMM (IR x CR) is high, then more sub. procedures will be done, which drops detection risk.

If RMM is low, the less sub. procedures will be done, which raises detection risk because there is a higher risk that the auditor will fail to detect a material misstatement.

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

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