Final answer:
Setting detection risk as low in auditing means implementing rigorous procedures to ensure that misstatements in financial statements are caught, akin to buying insurance to protect against unlikely but disastrous events.
Step-by-step explanation:
To set detection risk as low means to minimize the likelihood that an auditor will fail to catch material misstatements in a client's financial statements. In the context of audit risk, detection risk is the chance that an auditor's procedures will not detect a misstatement that exists in an assertion that could be material, either individually or in combination with other misstatements. A low detection risk is critical, particularly when the potential for misstatements is high and the other components of audit risk (inherent and control risks) are at a level that the auditor cannot reduce. Much like buying insurance for rare but potentially catastrophic events, auditors aim to minimize detection risk even if the probability of a significant misstatement is low because the consequences of not catching a critical error could be devastating for the auditor's reputation and potentially for the client's business and stakeholders.