The risk of material misstatement resulting from the internal controls in place failing to detect a fraudulent or erroneous transaction is:
A)An inherent risk
B)A control risk
C)A detection risk
D)An incontrollable risk

Question

Quizplus · Accepted Answer

This risk is related to the effectiveness of internal controls, which is addressed in the assessment of control risk. Control risk is the risk that a material misstatement will not be prevented or detected on a timely basis by the entity's internal controls. In contrast, inherent risk relates to the nature of the account or assertion being audited, while detection risk relates to the risk that audit procedures will not detect a material misstatement that exists in an account or assertion. Incontrollable risk is not a recognized term in auditing.

The Risk of Material Misstatement Resulting from the Internal Controls