Inherent risk is reduced where the likelihood of misstatement is low. This would be true for accounts receivable if:

Question

Quizplus · Accepted Answer

Current balances in accounts receivable indicate that customers are current on their payments and the likelihood of misstatement is therefore lower. Overdue balances could suggest that customers are not paying their debts, which increases the risk of misstatement. Balances from overseas customers or related parties do not necessarily have a direct impact on the likelihood of misstatement.

Inherent Risk Is Reduced Where the Likelihood of Misstatement Is