Inherent risk is
A) assessed as high when there are no internal controls tested or relied upon by the auditor.
B) assessed as low when there are good internal controls in place.
C) the risk of a misstatement occurring irrespective of any internal controls put in place by management.
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 material misstatement occurring in the financial statements regardless of any internal controls put in place by management. Even if there are good internal controls, inherent risk can still exist due to the nature of the business or industry, complexity of transactions, or other factors. The auditor's assessment of inherent risk is based on their understanding of the entity and its environment, and is used to determine the nature, timing, and extent of audit procedures.

Inherent Risk Is