Explain the relationship between audit risk and detection risk.

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Answer 1

Question

Chapter 5, Problem 1RQ

To determine

Explain the relationship between audit risk and detection risk.

Expert Solution & Answer

Explanation of Solution

Risk:

It is uncertainty about the future events of the company. The adverse chances of choosing an alternate over another is known as risk.

Audit risk:

The purpose of the audit is to provide an independent and professional opinion on the fairness and accuracy of the financial statement of the company. The auditor of the company is engaged in the analysing of the financial statement to perform the audit process. If the auditor finds any misstatement then he highlights the issue to the management of the company.

Audit risk arises when the auditor is not able to find the misstated information in the financial statement of the company. When the financial statement possesses the material misstatement even after the auditing, then it is regarded as an audit risk

Detection risk:

When the auditor is not able to find the misstatement in the financial statement of the company then it is known as detection risk. When the auditor is not able to detect the misstatement due to error or risk and it will result in the incorrect opinion of the auditor then it is known as detection risk. The reason for detection risk is poor audit technique, lack of business understanding, lack of competence.

Explain the relationship between audit risk and detection risk:

Detection risk is a model of audit risk. Audit risk may arise due to the detection risk. The higher detection risk, higher the audit risk. Detection risk results in the misstatement of the financial statement when the auditor is not able to find the misstatement.

Thus, audit risk rises with the increase in the detection risk.

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Question 5.5

Carla Vista Company had $212,200 of net income in 2024 when the unit selling price was $151, the unit variable costs were $95, and the fixed costs were $571,800. Management expects per unit data and total fixed costs to remain the same in 2025. The president of Carla Vista Company is under pressure from stockholders to increase net income by $84,000 in 2025. (a) Compute the number of units sold in 2024. Sales in 2024 units

The sales level in units required

Answer 2

Question

Chapter 5, Problem 1RQ

To determine

Explain the relationship between audit risk and detection risk.

Expert Solution & Answer

Explanation of Solution

Risk:

It is uncertainty about the future events of the company. The adverse chances of choosing an alternate over another is known as risk.

Audit risk:

The purpose of the audit is to provide an independent and professional opinion on the fairness and accuracy of the financial statement of the company. The auditor of the company is engaged in the analysing of the financial statement to perform the audit process. If the auditor finds any misstatement then he highlights the issue to the management of the company.

Audit risk arises when the auditor is not able to find the misstated information in the financial statement of the company. When the financial statement possesses the material misstatement even after the auditing, then it is regarded as an audit risk

Detection risk:

When the auditor is not able to find the misstatement in the financial statement of the company then it is known as detection risk. When the auditor is not able to detect the misstatement due to error or risk and it will result in the incorrect opinion of the auditor then it is known as detection risk. The reason for detection risk is poor audit technique, lack of business understanding, lack of competence.

Explain the relationship between audit risk and detection risk:

Detection risk is a model of audit risk. Audit risk may arise due to the detection risk. The higher detection risk, higher the audit risk. Detection risk results in the misstatement of the financial statement when the auditor is not able to find the misstatement.

Thus, audit risk rises with the increase in the detection risk.

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Answer 3

Question

Chapter 5, Problem 1RQ

To determine

Explain the relationship between audit risk and detection risk.

Expert Solution & Answer

Explanation of Solution

Risk:

It is uncertainty about the future events of the company. The adverse chances of choosing an alternate over another is known as risk.

Audit risk:

The purpose of the audit is to provide an independent and professional opinion on the fairness and accuracy of the financial statement of the company. The auditor of the company is engaged in the analysing of the financial statement to perform the audit process. If the auditor finds any misstatement then he highlights the issue to the management of the company.

Audit risk arises when the auditor is not able to find the misstated information in the financial statement of the company. When the financial statement possesses the material misstatement even after the auditing, then it is regarded as an audit risk

Detection risk:

When the auditor is not able to find the misstatement in the financial statement of the company then it is known as detection risk. When the auditor is not able to detect the misstatement due to error or risk and it will result in the incorrect opinion of the auditor then it is known as detection risk. The reason for detection risk is poor audit technique, lack of business understanding, lack of competence.

Explain the relationship between audit risk and detection risk:

Detection risk is a model of audit risk. Audit risk may arise due to the detection risk. The higher detection risk, higher the audit risk. Detection risk results in the misstatement of the financial statement when the auditor is not able to find the misstatement.

Thus, audit risk rises with the increase in the detection risk.

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Answer 4

Question

Chapter 5, Problem 1RQ

To determine

Explain the relationship between audit risk and detection risk.

Expert Solution & Answer

Explanation of Solution

Risk:

It is uncertainty about the future events of the company. The adverse chances of choosing an alternate over another is known as risk.

Audit risk:

The purpose of the audit is to provide an independent and professional opinion on the fairness and accuracy of the financial statement of the company. The auditor of the company is engaged in the analysing of the financial statement to perform the audit process. If the auditor finds any misstatement then he highlights the issue to the management of the company.

Audit risk arises when the auditor is not able to find the misstated information in the financial statement of the company. When the financial statement possesses the material misstatement even after the auditing, then it is regarded as an audit risk

Detection risk:

When the auditor is not able to find the misstatement in the financial statement of the company then it is known as detection risk. When the auditor is not able to detect the misstatement due to error or risk and it will result in the incorrect opinion of the auditor then it is known as detection risk. The reason for detection risk is poor audit technique, lack of business understanding, lack of competence.

Explain the relationship between audit risk and detection risk:

Detection risk is a model of audit risk. Audit risk may arise due to the detection risk. The higher detection risk, higher the audit risk. Detection risk results in the misstatement of the financial statement when the auditor is not able to find the misstatement.

Thus, audit risk rises with the increase in the detection risk.

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Answer 5

Chapter 5, Problem 1RQ

To determine

Explain the relationship between audit risk and detection risk.

Expert Solution & Answer

Explanation of Solution

Risk:

It is uncertainty about the future events of the company. The adverse chances of choosing an alternate over another is known as risk.

Audit risk:

The purpose of the audit is to provide an independent and professional opinion on the fairness and accuracy of the financial statement of the company. The auditor of the company is engaged in the analysing of the financial statement to perform the audit process. If the auditor finds any misstatement then he highlights the issue to the management of the company.

Audit risk arises when the auditor is not able to find the misstated information in the financial statement of the company. When the financial statement possesses the material misstatement even after the auditing, then it is regarded as an audit risk

Detection risk:

When the auditor is not able to find the misstatement in the financial statement of the company then it is known as detection risk. When the auditor is not able to detect the misstatement due to error or risk and it will result in the incorrect opinion of the auditor then it is known as detection risk. The reason for detection risk is poor audit technique, lack of business understanding, lack of competence.

Explain the relationship between audit risk and detection risk:

Detection risk is a model of audit risk. Audit risk may arise due to the detection risk. The higher detection risk, higher the audit risk. Detection risk results in the misstatement of the financial statement when the auditor is not able to find the misstatement.

Thus, audit risk rises with the increase in the detection risk.

Answer 6

Chapter 5, Problem 1RQ

To determine

Explain the relationship between audit risk and detection risk.

Expert Solution & Answer

Explanation of Solution

Risk:

It is uncertainty about the future events of the company. The adverse chances of choosing an alternate over another is known as risk.

Audit risk:

The purpose of the audit is to provide an independent and professional opinion on the fairness and accuracy of the financial statement of the company. The auditor of the company is engaged in the analysing of the financial statement to perform the audit process. If the auditor finds any misstatement then he highlights the issue to the management of the company.

Audit risk arises when the auditor is not able to find the misstated information in the financial statement of the company. When the financial statement possesses the material misstatement even after the auditing, then it is regarded as an audit risk

Detection risk:

When the auditor is not able to find the misstatement in the financial statement of the company then it is known as detection risk. When the auditor is not able to detect the misstatement due to error or risk and it will result in the incorrect opinion of the auditor then it is known as detection risk. The reason for detection risk is poor audit technique, lack of business understanding, lack of competence.

Explain the relationship between audit risk and detection risk:

Detection risk is a model of audit risk. Audit risk may arise due to the detection risk. The higher detection risk, higher the audit risk. Detection risk results in the misstatement of the financial statement when the auditor is not able to find the misstatement.

Thus, audit risk rises with the increase in the detection risk.

Answer 7

Chapter 5, Problem 1RQ

To determine

Explain the relationship between audit risk and detection risk.

Answer 8

Expert Solution & Answer

Explanation of Solution

Risk:

It is uncertainty about the future events of the company. The adverse chances of choosing an alternate over another is known as risk.

Audit risk:

The purpose of the audit is to provide an independent and professional opinion on the fairness and accuracy of the financial statement of the company. The auditor of the company is engaged in the analysing of the financial statement to perform the audit process. If the auditor finds any misstatement then he highlights the issue to the management of the company.

Audit risk arises when the auditor is not able to find the misstated information in the financial statement of the company. When the financial statement possesses the material misstatement even after the auditing, then it is regarded as an audit risk

Detection risk:

When the auditor is not able to find the misstatement in the financial statement of the company then it is known as detection risk. When the auditor is not able to detect the misstatement due to error or risk and it will result in the incorrect opinion of the auditor then it is known as detection risk. The reason for detection risk is poor audit technique, lack of business understanding, lack of competence.

Explain the relationship between audit risk and detection risk:

Detection risk is a model of audit risk. Audit risk may arise due to the detection risk. The higher detection risk, higher the audit risk. Detection risk results in the misstatement of the financial statement when the auditor is not able to find the misstatement.

Thus, audit risk rises with the increase in the detection risk.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

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Explain the relationship between audit risk and detection risk.

Explain the relationship between audit risk and detection risk.

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