Reference no: EM131773374

Please answer in essay format, in the US context:

‘Inherent Risk' can be defined as the combination of internal and external risk factors in their pure, uncontrolled state, or gross risk that exists assuming there are no internal control activities in place.

‘Residual Risk', on the other hand, can be defined as the portion of inherent risk that remains after management executes its risk responses.

With the above definitions in mind, discuss why internal auditors typically focus on inherent risk while management tends to focus on residual risk.