Risk of Undetected Errors in IS Auditing

Identifying the Risk of Undetected Errors in IS Auditing

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Question

The risk that the IS auditor will not find an error that has occurred is identified by which of the following terms?

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Explanations

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A. B. C. D.

A.

The risk that an IS auditor will not be able to detect an error that has occurred is referred to as "Detection Risk." Detection risk is one of the components of audit risk, which is the risk that an auditor may provide an inappropriate opinion on the financial statements.

The three components of audit risk are inherent risk, control risk, and detection risk. Inherent risk is the risk that an error or fraud exists in the financial statements, regardless of any controls in place. Control risk is the risk that a material misstatement will not be prevented or detected on a timely basis by the internal controls of an organization. Detection risk is the risk that an auditor will not be able to detect a material misstatement that exists in the financial statements.

Therefore, in this case, the risk that the IS auditor will not be able to detect an error that has occurred is "Detection Risk." This risk can be mitigated by increasing the extent of audit testing, obtaining more reliable evidence, and increasing the skill level of the auditor. The auditor should design audit procedures that are responsive to the assessed risks of material misstatement and effective in detecting such misstatements.