Millie Buenavista Made the Following Two Statements Concerning Inherent Risk

question 54

Multiple Choice

Millie Buenavista made the following two statements concerning inherent risk: (i) Inherent risk is the risk that an auditor expresses an inappropriate audit opinion when the financial statements are materially misstated.
(ii) Inherent risk deals with the susceptibility of the financial statements to material misstatements without considering internal controls.

• A) Both statements are correct.
• B) Neither statement is correct.
• C) Only statement (i) is correct.
• D) Only statement (ii) is correct.

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Definitions:

Inventory Turnover

A measure of how many times a company’s inventory is sold and replaced over a period, indicating efficiency in inventory management.

Cash-to-cash Cycle

The time duration it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

Accounts Receivables

Money owed to a company by customers who have purchased goods or services on credit.

Insolvent

The state of being unable to pay off debts as they come due, having liabilities exceed assets.