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Home > Auditing > Question

What is a source of inherent risk:

0
A) Audit planning procedures
B) Strong internal audit system
C) Human error
D) External confirmation

Correct Answer: C) Human error

• In corporate auditing, a massive and highly unpredictable source of inherent risk is Human error. • Inherent risk is the natural susceptibility of an account to material misstatement before considering Internal controls. • Complex financial calculations and high-value cash transactions naturally possess high Inherent risk. • The risk that a company's internal controls fail to catch an error is called Control risk. • The risk that an external auditor completely fails to detect a massive misstatement is Detection risk.

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