An auditor is performing a 'test of details' on the existence of accounts receivable. The auditor selects a sample of customers and sends positive confirmations. This procedure primarily addresses which type of risk?

Answer options:

Inherent Risk.

Control Risk.

Detection Risk.

Business Risk.

How to approach this question

Link procedures to the Audit Risk Model. Substantive Procedures -> Reduce Detection Risk. Tests of Controls -> Assess Control Risk.

Full Answer

C.Detection Risk.✓ Correct

The auditor performs substantive procedures (tests of details and analytical procedures) to detect material misstatements. Increasing the extent of these procedures reduces Detection Risk.

Common mistakes

Thinking substantive tests reduce control risk.

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