inherent risk is risk of material misstatement in absence of internal control system.
Significant risk are those inherent risks which have high Probability and high amount involved.
Inherent risk already includes MATERIAL MISSTATEMENTS (MM) and MM itself includes those risks whose probability is high and involves high amount. then where lies the difference between two words?
Inherent risk – The susceptibility of an assertion about a class of transaction, account balance or disclosure to a misstatement that could be material, either individually or when aggregated with other misstatements, before consideration of any related controls.
Above is definition of inherent risk, risk that TBD (Transaction / Balance / Disclosure) may lead to material misstatement assuming not internal control system. Definition did not talk about probability and amount.
Significant risk – An identified and assessed risk of material misstatement that, in the auditor’s judgment, requires special audit consideration.
Now special consideration is required
if likelihood / probability of misstatement is very high and Amount involved is all high
Inherent Risk is only for material misstatament
Significant Risk is also for material misstatement but high probability & high amount