An auditor has identified that their client operates in a highly competitive industry where consumers differentiate products on the basis of technological innovation rather than price. 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 completeness for Research and Development expenditure will be lower.
2. Inherent risk for the assertion of completeness for Provision for Warranty Claims will be higher.

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.