AA – L2 – SA – Q4.4 – Inherent Risk Factors

Which of the following is NOT an inherent risk factor?

A   Control environment

 Subjectivity

 Uncertainty

 Change

A

Explanation:
Inherent risk factors are characteristics of the entity or its environment that increase the risk of material misstatement before considering controls. Subjectivity, uncertainty, and change are inherent risk factors as they relate to estimation, unpredictability, or business dynamics. The control environment, however, is part of the internal control system and not an inherent risk factor. Option A is the correct answer.