Which of the following is an accurate statement regarding inherent risk?
A) The profession has established guidelines for setting inherent risk.
B) Auditors are generally conservative in setting inherent risk.
C) Factors impacting inherent risk will affect all cycles, balances, and disclosures.
D) Inherent risk has no impact on the amount of evidence gathered.

Question

Quizplus · Accepted Answer

Inherent risk is 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. Auditors often adopt a conservative approach when assessing inherent risk to ensure that they do not underestimate the risk of material misstatement, which could lead to insufficient audit evidence being gathered. There are no established guidelines for setting inherent risk as it varies by client and by the auditor's professional judgment. Inherent risk can differ across cycles, balances, and disclosures, and it directly impacts the amount of evidence an auditor needs to gather.

Which of the Following Is an Accurate Statement Regarding Inherent