Which of the below is an example of an inherent risk:
A) the risk that the economy will sink into recession.
B) the risk that the firm will be a take-over target.
C) the risk that a particular financial statement account is incorrect.
D) All of the above.

Question

Quizplus · Accepted Answer

Inherent risk refers to the risk that exists in the absence of any internal controls, and arises from the nature of the business or environment in which it operates. The risk that a particular financial statement account is incorrect, is an example of inherent risk, as it is something that can occur due to the nature of the business, and cannot be completely controlled or prevented by the company. Options A and B are both external risks that are not inherent to the business operations or accounting process of the company.

Which of the Below Is an Example of an Inherent