Question

For each of the following factors, fill in the blank spaces by indicating whether they affect primarily business risk, inherent risk, or control risk.

1 Management integrity

2 Possibility of ligaon against the auditor

3 Internal control structure

4 Motivation of management to misstate financial statements

5 Accounting knowledge of the client’s controller

6 Quality of the internal audit function

7 Users’ understanding of auditor responsibilities

8 Complex accounting transactions on leases

9 Sophistication of the accounting system

10 Client understanding of the auditor’s responsibilities

Answer 1

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