In Order to Obtain an Understanding of the Client's Business

question 147

Multiple Choice

In order to obtain an understanding of the client's business, the audit firm will consider

• A) inherent and control risk of the client.
• B) audit risk to the CPA firm.
• C) the client's business risk and the risk of material misstatements in the financial statements.
• D) the CPA firm's potential ongoing revenue from the audit client.

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Definitions:

Causal Factor

An element or condition that directly influences the occurrence of an event or the outcome of a process.

Bathroom Floor

The surface or part of a bathroom upon which one stands, often made of tile, linoleum, or other water-resistant material.

Leak

The accidental escape of a fluid or gas through a hole or crack, or the disclosure of confidential information.

Plumbing

The system of pipes, drains, fittings, valves, and fixtures installed for the distribution of water for drinking, heating, and washing, and the removal of waterborne wastes.