Inherent risk is the susceptibility of a transaction or accounting adjustment to be recorded in error,or for the transaction not to be recorded in the absence of internal controls.

Question

Quizplus · Accepted Answer

Inherent risk is defined as the risk of material misstatement in a financial statement component, either on its own or when aggregated with other components, due to error or omission. It is based on the nature of the transaction or accounting adjustment, and it exists regardless of internal controls. Therefore, the statement "Inherent risk is the susceptibility of a transaction or accounting adjustment to be recorded in error, or for the transaction not to be recorded in the absence of internal controls" is true.

Inherent Risk Is the Susceptibility of a Transaction or Accounting