Assume that the audit risk model used to set detection risk contains the following percentages (from the prior-year audit) relating to the valuation assertion for net accounts receivable.

Required:

a. Use the audit risk model to set the detection risk used in the prior-year audit.

b. In your own words, indicate what detection risk means.

c. Answer the following questions:
1. What reason might the auditor have to assess inherent risk for the valuation assertion at less than 0.40 for this year's audit? At more than 0.40 for this year's audit?
2. What reason might the auditor have to assess control risk for the valuation assertion at less than 0.40 for this year's audit? At more than 0.40 for this year's audit?

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Individual audit risk for this assertion 0.05 Inherent risk for this assertion 0.40 Control risk for this assertion 0.40 Detection risk for this assertion P