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:

Marketing Mix

The combination of factors that can be controlled by a company to influence consumers to purchase its products, typically referred to as the four Ps: product, price, place, and promotion.

NIH Barriers

Stands for "Not Invented Here" barriers, a term referring to the reluctance or inability of a company to accept or adopt innovations or solutions developed outside its own boundaries.

Organizational Inertias

The tendency of an organization to continue on its current trajectory despite changes in the external environment, often due to resistance to change.

Open Innovation

A business model that encourages collaboration with individuals or companies outside an organization to jointly develop new products or services.