Which of the Following Statements Regarding Inherent Risk Is Correct

question 33

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 experience, even when there is inherent risk.
• D) Inherent risk is dependent upon the strengths in client's internal control system.

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Definitions:

Contingency Approach

A management theory that suggests the best way to manage an organization depends on the specific circumstances and factors affecting it.

Multivariate Approach

A method in research or analysis that involves multiple variables to understand and interpret complex relationships and outcomes.

Open-System Perspective

A viewpoint in organizational theory that considers an organization as an entity that interacts with its external environment.

Organizational Learning

A process within companies where knowledge is created, acquired, and transferred, leading to a transformation of organizational behavior and thinking for enhanced performance and innovation.