Which of the following statements regarding inherent risk is correct?
A) Inherent risk is unaffected by the auditor's experience with client's organization.
B) Most auditors set a low inherent risk in the first year of an audit and increase it if experience shows that it was incorrect.
C) Most auditors set a high inherent risk in the first year of an audit and reduce it in subsequent years as they gain experience, even when there is inherent risk.
D) Inherent risk is dependent upon the strengths in client's internal control system.

Question

Quizplus · Accepted Answer

Auditors often set a high inherent risk in the first year of an audit due to lack of familiarity with the client, and may reduce it in subsequent years as they gain more understanding and experience with the client's operations and controls.

Which of the Following Statements Regarding Inherent Risk Is Correct