Question

An auditor obtains knowledge of an audit client’s business and its industry in order to: (a)...

An auditor obtains knowledge of an audit client’s business and its industry in order to:

(a) Develop an attitude of professional scepticism concerning management’s financial statement assertions.

(b) Make constructive suggestions concerning improvements in the client’s internal control.

(c) Understand the events and transactions that may have an effect on the financial statements.

(d) Evaluate whether the aggregation of known misstatements causes the financial statements taken as a whole to be materially misstated.

Discuss each of (a)–(d) individually in explaining why, or why not, it explains why an auditor obtains knowledge of a new client’s business and its industry.

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