Week 3 - Inherent Risk

Question 1

What are the first two factors of inherent risk?

Answer 1

• the trading history and cash position of the business
• the nature of the entity’s operations

Question 2

What are the second two factors of inherent risk?

Answer 2

• market conditions i.e demand level and competition
• the quality and experience of management

Question 3

What are the final two factors of inherent risk?

Answer 3

• the complexity of their operations
• judgements required over specific transactions