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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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A common way to assess the likelihood of an inherent risk is to measure its

  1. a. incremental cost.
  2. b. probability.
  3. c. lost revenues.
  4. d. company reputation.

To determine

Identify the way which is commonly used to assess the likelihood of an inherent risk.

Explanation

Inherent Risk:

Inherent risk is a risk that prevails in a system before any control measure is adopted within an organization.

b.

Inherent risk is assessed by estimating two types of uncertainties; first, likelihood of the risk and second, the effect on organization in the event of its occurrence.

Likelihood of a risk can be measured by estimating its probability of occurrence. Probability is estimated within 0 and 1. Where, 0 refers no chance of occurrence and 1 refers as 100% chances, or that event will occur for sure. Therefore, this is the correct option...

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