A risk assessment rates the risk of unauthorized wire transfers as high before considering controls. After dual authorization and daily bank reconciliations are introduced, the risk is rated low. The low rating is the:

Correct answer: C) Residual risk

Explanation

Inherent risk is the risk in the absence of any management actions or controls. Residual risk is the risk that remains after management's responses, such as controls, have been applied. Management compares residual risk with risk appetite to decide whether further action is needed.