Which of the following is true of the influence of significant accounts and classes of transactions on inherent risk?
A)When determination of account balance is objective, the inherent risk is low.
B)When the transactions are routine and relatively homogenous, the inherent risk is high.
C)When the account has high volume of transactions, the inherent risk is low.
D)When the determination of an account balance is subjective, the inherent risk is low.

Question

Quizplus · Accepted Answer

When the determination of account balance is objective, it means there is less subjectivity involved in the process. This reduces the likelihood of material misstatement, resulting in lower inherent risk. Therefore, option A is correct. Options B and C are incorrect as routine and homogeneous transactions may not necessarily pose a significant risk, and a high volume of transactions may increase the likelihood of errors, resulting in higher inherent risk. Option D is also incorrect as subjective determinations may result in higher inherent risk.

Which of the Following Is True of the Influence of Significant