Inherent risk is:
A)the risk of a misstatement occurring irrespective of any internal controls put in place by management.
B)assessed as high when there are no internal controls tested or relied upon by the auditor.
C)assessed as low when there are good internal controls in place.
D)the risk that the auditor's testing procedures will not detect a material misstatement.

Question

Quizplus · Accepted Answer

Inherent risk is the risk of a misstatement occurring irrespective of any internal controls put in place by management, which means it is an inherent characteristic of the client's business and industry. It is not related to the effectiveness of internal controls. Therefore, option A is the correct answer. Option B, C, and D are incorrect as they are not the definition of inherent risk.

Inherent Risk Is