What is Inherent risk?

The susceptibility of an assertion about a class of transactions, account balance or disclosure to a material misstatement before consideration of any related controls. This risk stems from the nature of the company's business and of the item: for example, it is higher where there are complex calculations or large estimation uncertainty. Under ISA 200, inherent risk together with control risk makes up the "risk of material misstatement"; the auditor does not create this risk but only assesses it.

Source: 200-son XAS (ISA 200), 13-paragraf (ta'riflar); IAASB: ISA 315 (Revised 2019) Identifying and Assessing the Risks of Material Misstatement