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Glossary/Inherent risk factors

What is Inherent risk factors?

In short

Inherent risk factors are characteristics that make an assertion more likely to be misstated before considering controls: complexity, subjectivity, change, uncertainty, and susceptibility to misstatement from management bias or fraud.

Key takeaways

  • Accounting estimates often score high on subjectivity and uncertainty.
  • New standards, systems or business lines bring change risk.
  • The factors are considered together when assessing inherent risk.

Where it's tested

AUD: Assessing Risk of Material Misstatement — study notes, a five-minute revision sheet and practice questions.

Practise: 3 questions

Question 1 of 3 · 0 answered

A client operates with weak segregation of duties over its cash disbursement process. All else equal, how should the auditor respond?

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