Question

Inherent risk is present in organizations at which of the following levels?a. At the assertion level.b. At the financial statement level in terms of business risk relating to operations.c. At the financial statement level in terms of financial reporting.d. All of the above.

Answer 1

Answer:

Letter d is correct. All of the above

Explanation:

Inherent risk is any irregular hypothetical situation that could compromise organizational activities. In the above question all alternatives are correct because the inherent risk can affect any level of a company.

At the assertion level the inherent risk arises from the vulnerability of a statement to transactions, book balances and disclosures. This consequently also influences the level of financial risk statements related to operations and the level of financial statements in terms of financial reporting. The inherent risk is associated with the nature of a calculation and all the facts that may influence it, so it may be higher for more complex accounts and accounts subject to an uncertain estimate.