Final answer:
The statement is true; auditors will typically assess a higher level of inherent risk for processes with prior misstatements, such as the property management process, to reflect the increased likelihood of material misstatements in future audits.
Step-by-step explanation:
The statement is True. When an auditor detects misstatements in prior audits, this indicates that there may be issues with the accuracy of the accounting records or the effectiveness of the internal controls. Therefore, in future audits, the auditor will usually assess a higher level of inherent risk for those processes where misstatements were previously found, including the property management process. Inherent risk refers to the susceptibility of an assertion about a transaction, account balance, or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls.
By raising the assessment of inherent risk, the auditor acknowledges the increased likelihood that material misstatements could occur in the absence of effective controls. This assessment influences the nature, timing, and extent of further audit procedures to obtain sufficient appropriate audit evidence.