Which of the Following Statements Regarding Inherent Risk Is Correct

question 21

Multiple Choice

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 more knowledge about the company.
• D) Inherent risk is dependent upon the strengths in client's internal control system.

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Definitions:

Scientific Evidence

Data or facts that serve to either support or counter a scientific theory or hypothesis, obtained through systematic observation, experimentation, or research.

Ethical Standards

Guiding principles that help determine what is right and wrong in personal and professional conduct.

Audience Objections

The concerns, questions, or disagreements raised by an audience or consumers in response to a proposal, presentation, or product offering.

High Price

Refers to the cost of a product or service being significantly above average, often associated with premium quality or exclusivity.