In short
Inherent risk is the susceptibility of an assertion to a material misstatement before considering any related controls.
Key takeaways
- It is higher for complex, subjective or judgment-heavy items, such as estimates, and for assets easily stolen.
- Together with control risk, it makes up the risk of material misstatement.
- The auditor assesses it but can't change it.
Where it's tested
AUD: Assessing Risk of Material Misstatement — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under SAS No. 145, which of the following is NOT an inherent risk factor?