Practice Quiz

Forensic Accounting

Category - Specialized Forensic Knowledge

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What is inherent risk?
  1. Risk that the financial statements are misstated
  2. Risk that is prevalent irrespective of the controls used to mitigate fraud risk
  3. Risk of overstatement of receivables
  4. Risk of understatement of cost of goods sold
Explanation
Answer: B - Inherent risk is prevalent irrespective of the controls used to mitigate fraud risk. It is independent of the internal control methodologies in place, and refers to the presence of risk even when the internal controls are in place.
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