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A planned detection risk (PDR) of .05 means the auditor plans to accumulate audit evidence until...

A planned detection risk (PDR) of .05 means the auditor plans to accumulate audit evidence until the risk of misstatement exceeding performance materiality is reduced to 5 percent.

True or False

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Answer #1

Ans : True

Explanation:

PDR stands for planned detection risk.

And formula to find PDR is as follow.

PDR= AAR/ (IR x CR)

where,

AAR= Acceptable Audit Risk

IR= Inherent Risk

CR=Control Risk

Extent of evidence the auditor plans to accumulate the other categories effect how much evidence a business plan to accumulate.

This is nothing but PDR.

There is inverse relationship between Planned detection and accumulation of evidence.

If planned detection is reduce Auditor have to find more evidence
If planned detection is increase Auditor have to find less evidence

If answer to above equation is 0.5 this means,

Auditor is planning to accumulate evidence until ths risk misstatement exceeds the performance materiality reduced to 5%

Therefore,

Above statement is true.

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