What type of transactions ordinarily have high inherent risk because they involve management judgments or assumptions in formulating accounting balances?
A)Estimation.
B)Nonroutine.
C)Qualified.
D)Routine.

Question

Quizplus · Accepted Answer

Transactions that involve management judgments or assumptions in formulating accounting balances are referred to as estimation transactions. These transactions have a high inherent risk because they are not straightforward and involve a lot of subjective decisions. Such transactions require a high level of professional judgment, and it is possible that the final reported results may contain material errors or omissions. As a result, auditors typically pay close attention to these transactions and assess the accuracy and reasonableness of the management's assumptions and judgments.

What Type of Transactions Ordinarily Have High Inherent Risk Because