The auditor's assessment relating to risk of material misstatement in financial statements is a part of
A)the assessment of whether to accept the audit engagement
B)understanding the entity and its environment
C)the tests of controls
D)the tests of transactions

Question

Quizplus · Accepted Answer

The auditor's assessment relating to risk of material misstatement in financial statements is a part of the process of understanding the entity and its environment. This involves understanding the entity's internal control system, assessing the risk of material misstatement due to fraud or error and identifying areas where significant risks of material misstatements exist. The auditor then designs and performs audit procedures to obtain sufficient appropriate audit evidence to support the audit opinion. The assessment of whether to accept the audit engagement is a separate process, while tests of controls and transactions are part of the audit procedures.

The Auditor's Assessment Relating to Risk of Material Misstatement in Financial