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Which of the following factors would an auditor least likely consider when assessing the inherent risk associated with sales transactions?

a) Complexity of the sales transactions
b) Volume of sales transactions
c) Control environment surrounding sales
d) Cost of sales transactions

1 Answer

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Final answer:

The factor an auditor would least likely consider when assessing the inherent risk associated with sales transactions is the cost of the sales transactions, as this is more relevant to management's performance assessments than to the risk of misstatement in financial reporting.The correct answer is option d.

Step-by-step explanation:

When assessing the inherent risk associated with sales transactions, an auditor would consider several factors that could indicate a higher possibility of misstatement before considering the effect of controls. These factors include, but are not limited to, the complexity of the sales transactions, the volume of sales transactions, and the control environment surrounding sales. One of the listed options, however, stands out as less relevant to the assessment of inherent risk.

The complexity of the sales transactions is a key factor because more complex transactions are more prone to misinterpretation or misstatement. The volume of sales transactions is also important as a high number of transactions increases the chance of errors or fraud taking place. The control environment is part of the broader risk assessment, as it may determine how likely it is that any misstatements will be prevented or detected in a timely manner.

However, the cost of sales transactions is typically a concern of management in assessing performance or profitability, rather than of auditors in assessing inherent risk. Auditors are more interested in whether the transactions are recorded correctly and not in the actual cost unless it has a direct impact on recording errors or fraud risks. Therefore, the cost of the sales transactions is the factor an auditor would least likely consider when assessing the inherent risk associated with sales transactions.

The correct option, then, is d) Cost of sales transactions.

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