In assessing inherent risk for purchasing process assertions, the auditor should _______.
A)rely on the opinions formed by the internal audit function
B)consider pervasive factors influencing the understatement or overstatement of payables and expenses.
C)consider pervasive factors influencing the understatement or overstatement of receivables and expenses.
D)consider pervasive factors influencing the correct statement of payables and expenses.

Question

Quizplus · Accepted Answer

Inherent risk is the risk of material misstatement before considering the effectiveness of the entity's internal control. In assessing inherent risk, the auditor should consider factors that could lead to a material misstatement, such as the complexity of the process, the nature of the transactions, and the level of judgment involved. In the context of the purchasing process assertions, pervasive factors that could influence the understatement or overstatement of payables and expenses should be considered, such as the presence of related party transactions or the potential for fraud. The opinions formed by the internal audit function and the correct statement of payables and expenses are not relevant to the assessment of inherent risk for the purchasing process assertions. The assertion of receivables is not relevant to the purchasing process.

In Assessing Inherent Risk for Purchasing Process Assertions, the Auditor