Matilda Papas has been asked to lead her audit team in the audit of the Toronto Raptors basketball team. She performed a review of their risks and found that the team's risks tend to
Be driven by the nature of certain significant accounts or business activities that the Raptors
Pursue. This risk is
A) audit risk.
B) inherent risk.
C) control risk.
D) detection risk.

Question

Quizplus · Accepted Answer

The nature of significant accounts or business activities driving risk suggests inherent risk, which is the risk of material misstatement before considering internal controls. Audit risk (A) is the risk of expressing an inappropriate opinion on financial statements, control risk (C) is the risk that a material misstatement would not be prevented or detected by internal controls, and detection risk (D) is the risk that audit procedures will not detect a material misstatement. Although all of these risks are interrelated and impact the overall audit approach, the specific nature of the risk identified here points to inherent risk.

Matilda Papas Has Been Asked to Lead Her Audit Team