An Auditor Who Accepts an Audit Engagement Must Gain an Understanding

question 51

Multiple Choice

An auditor who accepts an audit engagement must gain an understanding of the client's industry and business. This includes knowledge of the:

• A) business operations and processes.
• B) industry and external environment.
• C) management and governance.
• D) all of the above

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Definitions:

Financial Statements

Reports that summarize the financial performance and position of a business, including the balance sheet, income statement, and statement of cash flows.

Debits

Accounting entries that increase asset or expense accounts or decrease liability, equity, or revenue accounts.

Credits

Entries made on the right side of an account in double-entry bookkeeping, which decrease assets or increase liabilities and equity.

Classified Balance Sheet

A balance sheet that organizes a company's assets, liabilities, and equity into subcategories for clearer understanding.