Question

Recall the definition of inherent risk. Why is it important for internal auditors to focus on inherent risk during the planning phase of an assurance engagement?

Answer 1

Inherent risk associated with the preparation of financial statements by committing and error or omission due to reasons other than a failure of internal control.
Inherent risk occurs the most when the financial transactions are complex and requires a high degree of judgement.
Nature of business and integrity of director and management after very basic factors, which highly affects the inherent risk.

Such inherent cannot be changed by the auditor.

Assurance engagement is on the other hand is the judgement provided by the auditor express an opinion about any matter.

So now it is important for internal auditors to focus on inherent risk during the planning phase of an assurance engagement as inherent risk can greatly affect the opinion of an auditor, about the audit report.