An Auditor Should Assess a Client's Business Risks

question 18

Multiple Choice

An auditor should assess a client's business risks:

• A)Early in the engagement, based on discussion with management.
• B)At the end of the engagement after all evidence has been assembled.
• C)As part of the year end evidence gathering.
• D)Only if the client requests the auditor to do so in the engagement letter.

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Definitions:

Balance Sheet

A financial overview presenting the resources, obligations, and equity of shareholders of a company at a specific point in time.

Gross Profit

The difference between revenue and the cost of goods sold before deducting operating expenses, indicating the efficiency of core operations.

Merchandising Profit

The profit a company makes from buying goods at wholesale and selling them at retail.

Company

An entity engaged in commercial, industrial, or professional activities, either for profit or as a nonprofit organization.