Inherent Risk

question 103

Multiple Choice

Inherent risk

• A)exists because all control structures are flawed in some ways.
• B)is the likelihood that material misstatements exist in the financial statements of the firm.
• C)is associated with the unique characteristics of the business or industry of the client.
• D)is the likelihood that the auditor will not find material misstatements.

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Definitions:

Material

Significant or relevant information or items necessary for the production process or considered in decision-making.