Inherent risk
In one sentenceThe likelihood of a material error in an item because of its nature, before considering any internal control the business places on it.
Simply put
Some items are risky by nature: cash is easy to steal, valuable inventory is small in size, and estimates such as provisions depend on personal judgment. This is inherent risk.
The auditor does not control it or eliminate it, but assesses it to decide where to focus his effort.
Example
In a jewelry store, the inherent risk for inventory is high because the pieces are small, expensive and easy to hide, while it is low for the office furniture in the same store.
Don't confuse it with
Control riskInherent risk relates to the nature of the item, while control risk relates to weaknesses in the controls that are supposed to prevent errors.