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In connection with the preliminary planning for the audit of XYZ Company, the auditors have determined that they are willing to accept an overall risk
- In connection with the preliminary planning for the audit of XYZ Company, the auditors have determined that they are willing to accept an overall risk of material misstatement (audit risk) of 8% for the inventory account. Further, they have determined that overall inherent risk is 75%. In addition, they believe that the internal control system will detect material misstatements 80% of the time and fail to detect 20% of the time. Based on these facts, (and using the audit risk equation) what amount should the auditors set for detection risk?
Detection risk_______
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