Question
The auditors of Dunbar Electronics want to limit the risk of material misstatement in the valuation of inventories to 8 percent. They believe that there
The auditors of Dunbar Electronics want to limit the risk of material misstatement in the valuation of inventories to 8 percent. They believe that there exists a 55 percent risk that a material misstatement could have bypassed the clients internal control and that the inherent risk of the account is 86 percent. They also believe that the analytical procedures performed to test the assertion have a 39 percent risk of failing to detect a material misstatement.
Required:
b. Calculate the maximum allowable risk of incorrect acceptance for the substantive test of details. (Enter your answer in number and not as percentage. Round your answer to 3 decimal places.)
c. What level of detection risk is implicit in this problem? (Enter your answer in number and not as percentage. Use the final answer from requirement b. Round your final answer to 3 decimal places.)
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