Inherent risk is defined in terms of:
A) a total absence of controls.
B) an ideal set of controls.
C) the existing controls.
D) the standard controls for the client's industry.

Question

Quizplus · Accepted Answer

Inherent risk is defined as the susceptibility of an assertion about a transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls. This means it exists independently of the audit and is related to the nature of the business or transaction itself, implying a total absence of controls.

Inherent Risk Is Defined in Terms Of