Day: August 23, 2025

Which ONE of the following might indicate that an assurance client could be higher than normal inherent or control risk?

Select ONE answer:

1. Strong internal controls
2. Experienced and stable senior management
3. Poor recent performance
4. The existence of an internal audit department

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct == >    Poor recent performance may indicate a high risk that the company may misstate its financial statements to show improved recent performance. A company carrying out unusual transactions would also be a high risk, as each transaction would require a separate understanding, leading to a higher risk of error. Strong internal controls, experienced and stable senior management, and the existence of an internal audit department would be low-risk indicators.
4. Not correct

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