Recall the definition of inherent risk. Why is it important for internal auditors to focus on...

Recall the definition of inherent risk. Why is it important for internal auditors to focus on inherent risk during the planning phase of an assurance engagement?

Auditing & assurance services, fourth edition.

Expert Solution

Definition of Inherent Risk:

Inherent risk is the susceptibility of an account balance or class of transaction to a material misstatements, assuming that there were no internal control exit.

To assess the inherent risk, the auditor should evaluate numerous factors, having regard to his experience of the entity from previous audit engagement of the entity, controls established by management to compensate for a high level of inherent risk, and his knowledge of any significant changes which might changes which might have taken place since his last assessment.

It is important for internal auditor to focus on inherent risk during the planning phase of assurance engagement, as internal auditor need to verify whether internal controls are effective or not so they need to assume if there were no internal controls bare there than what is the risk factors are there.

Auditor need to collect all information & evidences from the management to evaluate the inherent risk factor.

Internal auditor need to evaluate the integrity of management management experience and knowledge & other functions of organisations.

So it is too important for the internal auditor to focus on inherent risk.

ekkarill92 answered 2 years ago

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