Home › CA Final › auditing › Risk Assessment and Internal Control › Inherent risk is BEST defined as:
Inherent risk is BEST defined as:
ARisk of auditor giving wrong opinion
BSusceptibility of an assertion to misstatement, before considering related controls
CRisk after considering controls
DRisk of regulatory penalties
Answer & Solution
Correct answer: C. Risk after considering controls
1. Inherent risk reflects susceptibility absent controls (SA 200).
2. Risk after controls is "residual" - combination of inherent and control risk.
3. Auditor risk = detection risk × IR × CR.
_Source: ICAI BoS CA Final Paper 3, Ch 3 "Risk Assessment and Internal Control"_
Related questions
The IT environment's impact on RoMM identification is BEST captured by:When responding to assessed risks at the financial-statement level, the auditor's overall The Audit Risk Model implies that when materiality (M) is set lower, holding other risks cInformation & Communication component of internal control aims to ensure that:Management override of controls is, per SA 240:A change in entity's revenue recognition policy mid-year would prompt the auditor to:For controls operating over a long period, the auditor wants to rotate testing in alternatUnder SA 540, when management uses a model to estimate Expected Credit Loss (ECL) under In