An auditor obtains knowledge about a new client's business and its industry in order to:
A)make constructive suggestions concerning improvements to the client's internal control.
B)develop an attitude of professional skepticism concerning management's financial statement assertions.
C)evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated.
D)understand the events and transactions that may have an effect on the client's financial statements.

Question

Quizplus · Accepted Answer

Obtaining knowledge about the client's business and industry helps the auditor understand the events and transactions that may impact the financial statements. This understanding is necessary to plan the audit and design audit procedures that are appropriate for the client's circumstances. Options A and B are related to the auditor's attitude and approach to the audit and option C is related to evaluating the effect of misstatements on the financial statements, but none of them capture the primary purpose of obtaining knowledge about the client's business and industry.

An Auditor Obtains Knowledge About a New Client's Business and Its