Which of the following statements is true?
A)Inherent risk is the susceptibility of an assertion to material misstatement before consideration of any related controls.
B)Inherent risk assessment is affected by internal factors but not external factors.
C)It is possible to eliminate audit risk.
D)During the risk assessment phase, auditors will perform audit procedures to identify transactions and accounts where the risk of material misstatement is lowest.

Question

Quizplus · Accepted Answer

Inherent risk is defined as the susceptibility of an assertion to material misstatement before considering any related controls. Option B is incorrect as inherent risk is affected by both internal and external factors. Option C is incorrect as it is not possible to completely eliminate audit risk, only to reduce it to an acceptably low level. Option D is incorrect as during the risk assessment phase, auditors will perform audit procedures to identify transactions and accounts where the risk of material misstatement is highest, not lowest.

Which of the Following Statements Is True