Question

- What is the importance of understanding the client before going for an audit? Please discuss in detail

Answer 1

Understanding the client before going for an audit helps the auditor to perform the audit effectively. Before performing the audit, the auditor must assess the type of business of the client and the types of risks associated with the business. For example, if the auditor is auditing the financial statements of a bank, he has to know the operations of the bank to assess the various types of mistakes that can occur in the financial statements of the bank.

If the auditor finds out from the assessment of his client that the management system of the client is not very good and there are too many risks associated with the business, then the auditor can plan his audit procedure accordingly with more focus. The risks of a business can be economic conditions prevailing in a country that may affect the business, or it may be the need of technological upgradation of the business, etc.