Achievable detection risk is a component of the audit risk model. In broad terms, achievable detection risk is the risk that a material misstatement in the unaudited information will not be detected by the auditor. (The Glossary to ISAs defines detection risk in relation to an account balance assertion as "the risk that the auditor’s procedures will not detect a misstatement that exists in an assertion that could be material, individually or when aggregated with other misstatements.") Detection risk is referred to as an achievable level as it is a risk that the auditor believes can be achieved, not an actual risk or a risk that has been achieved. In other words, it is an ex ante evaluation, and not an ex post evaluation. (See also the acceptable detection risk DR*.)
As with other risks, detection risk may be evaluated at various levels of aggregation (e.g. financial statement level, account balance level) and at various stages during the course of the audit (e.g. client acceptance/retention stage, audit planning stage, etc.). It is the only component of audit risk that is capable of being controlled by the auditor. Both inherent and control risk are beyond the auditor's control.
| LEVEL OF AGGREGATION |
AUDIT STAGES | ||||
|---|---|---|---|---|---|
| Client acceptance/ retention |
Audit planning | Control testing | Substantive testing | Opinion formulation | |
| Financial statement level |
DR1 | na | na | na | DR5 |
| Account balance assertion level |
na | DR2 | DR3 | DR4 | na |
The achievable level of detection risk at the financial statement level may be defined as the risk that a material misstatement in the unaudited financial statements will not be detected by the auditor.
The achievable level of detection risk at the financial statement level is evaluated in the first and last audit stages. In the first audit stage, the client acceptance/retention stage, it is referred to as DR1 and is used in the client acceptance/retention decision. In the last audit stage, the opinion formulation stage, it is referred to as DR5 and is used in the opinion formulation decision.
See also evaluation of the achievable level of detection risk at the financial statement level.
Detection risk at the account balance assertion level may be evaluated in the second, third and fourth audit stages, namely the audit planning, control testing and substantive testing stages where it is referred to as DR2, DR3 and DR4 respectively.
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