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What is Inherent Risk? - Definition & Assessment

Instructions:

Choose an answer and hit 'next'. You will receive your score and answers at the end.

question 1 of 3

A company has a construction business in USA. If a financial crisis happens in the country, its inherent risk will _____.

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1. In a discussion of inherernt risk, which of the following statements is TRUE?

2. Assume two companies, A and B. A is a retail bank and B is a trading company that deals with risky and complex securities, commodities and derivatives. The inherent risk in B will be _____ than the inherent risk in A.

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About This Quiz & Worksheet

When considering a retail bank and a trading company, which one has greater inherent risk? This quiz and worksheet will test your ability to accurately answer this question and others related to inherent risk.

Quiz & Worksheet Goals

You'll be tested on the following:

  • A company's inherent risk in a financial crisis
  • A true statement about inherent risk
  • Comparing the inherent risk of a retail bank and trading company
  • Examples of transactions that are non-routine

Skills Practiced

  • Knowledge application - use your knowledge to answer questions about inherent risk
  • Interpreting information - verify that you can read information about non-routine transactions and interpret it correctly
  • Information recall - access the knowledge you've gained regarding a true statement about inherent risk

Additional Learning

Be sure to check out the related lesson titled What is Inherent Risk? - Definition & Assessment. You'll learn more about this topic, including:

  • The assessment of risk as a subjective process
  • External factors that affect risk
  • How not having an audit history impacts risk
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