Which three of the following reasons could increase inherent risk? (choose three options)
A)Client offers warranties on its products.
B)Client has larger number of locations and operations are decentralized.
C)Client's transactions are complex and unique.
D)Client takes advantage of discounts offered by suppliers.

Question

Quizplus · Accepted Answer

A) Offering warranties on products could increase inherent risk as it creates potential liability for the client if the warranties are not fulfilled.
B) Decentralized operations could increase inherent risk as it could lead to inconsistencies in internal controls and difficulty in assessing the overall financial health of the organization.
C) Complex and unique transactions could increase inherent risk as they are more difficult to understand and assess for potential misstatement.
D) Taking advantage of discounts offered by suppliers does not increase inherent risk as long as the transactions are properly recorded and disclosed.

Which Three of the Following Reasons Could Increase Inherent Risk