Millie Buenavista made the following two statements concerning inherent risk: (i) Inherent risk is the risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
(ii) Inherent risk deals with the susceptibility of the financial statements to material misstatements without considering internal controls.
A) Both statements are correct.
B) Neither statement is correct.
C) Only statement (i) is correct.
D) Only statement (ii) is correct.

Question

Quizplus · Accepted Answer

Statement (ii) is correct because inherent risk refers to the susceptibility of financial statements to material misstatements without considering internal controls. Statement (i) is incorrect as it describes audit risk, not inherent risk.

Millie Buenavista Made the Following Two Statements Concerning Inherent Risk