ICANAudit & AssuranceAudit Risk and Risk Assessment2021

Which of the following is an example of inherent risk?

AAbsence of segregation of duties in the cash office
BComplexity of an accounting estimate for a warranty provisionCORRECT
CFailure of the auditor to select an appropriate sample
DManagement override of controls
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Toaster Teacher
Why the answer is B, and why the others tempt you.
Inherent risk is susceptibility to misstatement before considering controls, and is higher where balances involve judgement, estimation or complexity. Weak segregation is control risk and sampling failure is detection risk.
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