Answer (D) is correct . Inherent risk is the susceptibility of an assertion to a material misstatement in the absence of related controls. This risk is greater for some assertions and related balances or classes than others. For example, complex calculations are more likely to be misstated than simple ones, and cash is more likely to be stolen than an inventory of coal. Inherent risk exists independently of the audit.
Answer (A) is incorrect because Audit risk is the risk that the auditor may unknowingly fail to appropriately modify an opinion on financial statements that are materially misstated.
Answer (B) is incorrect because Detection risk is the risk that the auditor will not detect a material misstatement that exists in an assertion.
Answer (C) is incorrect because Sampling risk is the risk that a particular sample may contain proportionately more or fewer monetary misstatements or deviations from controls than exist in the population as a whole.
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