DETECTION RISK Definition

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DETECTION RISK is the risk that audit procedures will lead to a conclusion that material error does not exist when in fact such error does exist.

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RED HERRING is a preliminary registration statement describing the issue (the IPO) and prospects of the company that must be filed with the SEC or provincial securities commission. There is no price or issue size stated in the red herring. Red Herrings are sometimes updated several times before it is called the final prospectus. It is known as a red herring because it contains a statement typed in red that the company is not attempting to sell their shares before the registration is approved by the SEC.

CASH DRAW see PROPRIETORS DRAW.

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