Which of the following is not a primary consideration when assessing inherent risk?
A) nature of client's business
B) existence of related parties
C) effectiveness of internal controls
D) susceptibility to misappropriation of assets

Question

Quizplus · Accepted Answer

While the effectiveness of internal controls is an important factor to consider when assessing control risk, it is not a primary consideration when assessing inherent risk. Inherent risk refers to the risk associated with the nature of the client's business, such as the complexity of transactions, susceptibility to misstatement, and susceptibility to misappropriation of assets. The existence of related parties and the susceptibility to misappropriation of assets are also important factors to consider when assessing inherent risk.

Which of the Following Is Not a Primary Consideration When