Inherent Risk (IR) is defined as the likelihood that the financial statements are misstated before considering internal control.

• A. The risk that misstatements will be prevented by controls.
• B. The risk that misstatements will be detected by controls.
• C. The likelihood that the financial statements are misstated before considering internal control (that is, assuming no internal controls).
• D. The risk that the auditor will issue a wrong opinion.

Answer: (C)