Answer (B) is correct . One component of audit risk is detection risk, which is the risk that the auditor will not detect a material misstatement that exists in an assertion. Detection risk for a substantive test of details has two elements:? (1) the risk that analytical procedures and other relevant substantive tests will fail to detect misstatements at least equal to tolerable misstatement and (2) the allowable risk of incorrect acceptance for the substantive test of details. The auditor assesses control risk (the second component) when considering the client’s internal control. This assessment, the assessment of inherent risk, and the level to which the auditor wishes to restrict overall audit risk are the factors that the auditor uses to determine the acceptable level of detection risk.
Answer (A) is incorrect because The components of audit risk are inherent risk, control risk, and detection risk.
Answer (C) is incorrect because The components of audit risk are inherent risk, control risk, and detection risk.
Answer (D) is incorrect because The components of audit risk are inherent risk, control risk, and detection risk.
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