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 activitithat the Raptors pursue. This risk is
A) audit risk.
B) inherent risk.
C) control risk.
D) detection risk.

Question

Quizplus · Accepted Answer

Based on the information provided, it is evident that the nature of certain significant accounts or business activities pursued by the Toronto Raptors basketball team drives the team's risks. Inherent risk refers to the susceptibility of an account balance or transaction class to material misstatement, disregarding any internal controls. Therefore, inherent risk is the most appropriate choice. Control risk relates to the risk that a material misstatement could occur in an account balance or transaction class due to a lack of internal controls. Audit risk is the combination of inherent and control risks, alongside detection risk, which refers to the risk that auditors fail to detect a material misstatement when it is present.

Matilda Papas Has Been Asked to Lead Her Audit Team