If you don't set your DC correctly for water type it will give you a MOD alarm at the wrong depth. The MOD calculation is dependent on the depth of 1 atm (gauge) of water. Here is the formula for calculating MOD:
MOD = ((ppO2 / fO2) - 1) x dpa ...........;where dpa (depth per atmosphere) is 33 ft for salt and 34 ft for fresh water.
For a ppO2 of 1.4 atm, a fO2 of 36%, the MOD for salt and fresh water is 95 and 98 ft respectively. If you set your DC for fresh water instead of salt your DC will alarm at 98+ ft where you actually have exceeded your ppO2 limit of 1.4 atm. Setting your computer correctly for the actual dive you're going to do is important!
I don't think that this is correct.
MOD alarms are entered into the computer as PPO2 (i.e. 1.4), not as a depth. You aren't calculating a MOD, you are selecting a MOD.
You also enter into the computer what type of water you are diving in, but what that does is change the internal constant that the computer uses to convert a measured ambient pressure into a depth in feet or meters.
The computer uses the measured ambient pressure and the FiO2 of the breathing mix to calculate the PPO2, and if it's over the alarm value that you selected, you get an alarm. The constant that is used to generate your depth display has nothing to do with that.
So if you dive in salt water with your DC set for fresh water, you will get an inaccurate depth readout, but the only way you would know that would be to somehow compare it to a linear measure like a marked line. It would not change the safety of the dive. Your computer would alarm when your PPO2 reached 1.4 (or whatever you had set it to), and that calculated value is not going to be dependent on what you selected as the salinity constant.
PPO2= ATA x FiO2, whether you are diving in water, floating in air, or submerged in mercury.