inherent risk

Definition

A risk of misstatement due to error or fraud that is said to exist within a financial statement based on an assessment by an independent auditor regardless of management awareness of the error. An assessment of inherent risk can be based on a number of factors, including difficulties in calculating precise valuations, or uncertainties in the current business environment.

Use inherent risk in a sentence

You need to know what the inherent risk of any project is and decide if the reward makes it worth while.

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Insurance rates for the under 21 crowd can increase greatly due the inherent risks of youth thinking they are invincable

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The inherent risk was recognized by the auditor and accountant who worked alongside each other preparing the final report for us.

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