ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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INHERENT RISK Definition
INHERENT RISK, generally, it is the risk found in the environment and in human activities that is part of existence. In accounting, it is the susceptibility of an audit area to error which could be material, individually or in combination with other errors, assuming that there are no related internal controls.
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ACCRUAL BOND is a bond on which interest accrues, but is not paid out to the investor during the time of accrual; instead, the accrual interest is added to the amount of remaining principal and paid at maturity. Also known as an accretion bond or a Z-bond in a CMO issue. See Collateralized Mortgage Obligation.
SUBSEQUENT EVENTS affect the client and occur between the balance sheet date and issuance of the financial statements. Some such events provide additional evidence about conditions that existed at the balance sheet date, such as the bankruptcy of a customer with a history of financial difficulty. The financial statements are adjusted to reflect this evidence. Conditions that did not exist at the balance sheet date, such as fire that destroyed the client's plant after the balance sheet date, may be so significant as to require disclosure.