During the planning stage of an assurance engagement, internal auditors should focus their attention on identifying and assessing inherent risks. Inherent risk is the risk of a material misstatement or noncompliance due to error or fraud that could occur before any controls are applied. Understanding inherent risk is crucial as it helps auditors identify areas that may need more extensive testing and ensures that audit resources are appropriately allocated to the highest risk areas.
References:
The Institute of Internal Auditors (IIA) Practice Guide: Assessing the Adequacy of Risk Management Using ISO 31000
IIA Standard 2010 - Planning
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