Inherent risk refers to: a. The possibility that a material misstatement will occur within the reporting company's accounting information system b. The possibility that a material misstatement that has occurred will not be detected on a timely basis by the company's control system

Question

Business

Cherokee

8 August, 13:57

Inherent risk refers to: a. The possibility that a material misstatement will occur within the reporting company's accounting information system b. The possibility that a material misstatement that has occurred will not be detected on a timely basis by the company's control system

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Answers (2)

Know the Answer?

Joaquin Jennings · Answer 1

a.

Explanation:

Inherent risk refers to the possibility that a material misstatement will occur within the reporting company's accounting information system. In other words it is a risk that exists of there being an error or omitted data in the financial statement of a company/organization, that usually occurred due to a high degree of judgment being required.

Danielle Mcintosh · Answer 2

Inherent risk refers to:

a. The possibility that a material misstatement will occur within the reporting company's accounting information system

Explanation:

In a financial statement, there are complex transactions requiring judgement expertise and still they represent inherent risk, raised by a mistake or omission, due to a factor other than a failure of internal control, or the possibility that a material misstatement that has occurred will not be detected on a timely basis by the company's control system; the possibility that a material misstatement that has occurred will not be caught be the independent auditor's testing or the possibility that a material misstatement will occur in the financial statements.