Which statement regarding inherent risk is correct?
A) Most auditors set a high inherent risk in the first year of an audit and reduce it in subsequent years as they gain experience, even when there is inherent risk.
B) The inherent risk assigned in the audit risk model is unaffected by the auditor's experience with client's organisation.
C) The inherent risk assigned in the audit risk model is dependent upon the strengths in client's internal control system.
D) Most auditors set a low inherent risk in the first year of an audit and increase it if experience shows that it was incorrect.

Question

Quizplus · Accepted Answer

Auditors often set a high inherent risk in the first year due to lack of familiarity with the client, and may adjust it in subsequent years as they gain more experience and understanding of the client's business and controls.

Which Statement Regarding Inherent Risk Is Correct