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whitedreamerz whitedreamerz
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The risk of material misstatement is a combination of two client-controlled factors: inherent risk and control risk. What is inherent risk and why is it important? Give examples of inherent risk factors.
Textbook 

Auditing and Assurance Services


Edition: 17th
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oth987oth987
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Inherent risk is the auditor's assessment of the likelihood that there are material misstatements in the audit segment before the consideration of internal controls. Inherent risk is important because it attempts to predict where misstatements are most and least likely to occur. Factors that the auditor considers when assessing inherent risk include but are not limited to:
The nature of the client's business
Results of previous audits
Initial versus repeat engagements
Related parties
Complex or nonroutine transactions
Judgment required to correctly record account balances and transactions
Makeup of the population
Factors related to fraudulent financial reporting
Factors related to misappropriation of assets


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whitedreamerz Author
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2 months ago
Smart ... Thanks!
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Good timing, thanks!
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2 hours ago
Thanks
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