The audit team gathers information about a new client's business and industry in order to obtain:
A)an understanding of the clients internal control system for financial reporting.
B)an understanding of how economic events and transactions have an effect on the company's financial statements.
C)information about control risk.
D)information regarding whether the company is engaging in financial statement fraud.

Question

Quizplus · Accepted Answer

The audit team gathers information about a new client's business and industry to gain an understanding of how economic events and transactions affect the company's financial statements. This information helps the auditor plan the audit and identify potential areas of material misstatement in the financial statements. It does not directly provide information about the client's internal control system, control risk, or whether the company is engaging in financial statement fraud.

The Audit Team Gathers Information About a New Client's Business