Final answer:
Estimation transactions involve management judgments or assumptions and have high inherent risk. Auditors pay special attention to these transactions during the audit process.
Step-by-step explanation:
The type of transactions that ordinarily have a high inherent risk because they involve management judgments or assumptions are referred to as estimation transactions. These transactions involve making subjective estimates or assumptions about uncertain future events. Examples include the estimation of the useful life of an asset or the estimation of allowances for uncollectible accounts.
Estimation transactions are often subjective and require management to use their judgment, which can increase the risk of error or manipulation. Auditors pay special attention to these transactions during the audit process to ensure that they are reasonable and supported by adequate evidence.
Other types of transactions, such as nonroutine transactions or substantive transactions, may also involve management judgments, but they may not have the same level of inherent risk as estimation transactions.