As part of the risk assessment process, the auditor has identified that management has an incentive to increase profits in order to meet key performance indicators and earn performance bonuses. Which of the following most correctly describes the impact that this will have on the auditor's assessment of inherent risk?

1. Inherent risk for the assertion of cut-off for Sales Revenue will be higher.
2. Inherent risk for the assertion of accuracy, valuation and allocation for Accounts Receivable will be lower.

Required: Answer in the space below:

i. Which of the two options (A or B) is correct.

ii. Why the response selected is correct.

ili. Why the response not selected is incorrect.