When Obtaining an Understanding of the Entity and Its Environment

question 23

Multiple Choice

When obtaining an understanding of the entity and its environment, the auditor should obtain an understanding of internal controls primarily to:

• A)identify areas of relatively high risk of misstatement and plan the audit accordingly.
• B)provide suggestions for improvement to the company.
• C)serve as a basis for setting audit risk and materiality.
• D)decide whether to perform an audit for the company.

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Definitions:

Work Team Structure

The organization and arrangement of teams within a workplace, designed to enhance collaboration, efficiency, and task completion.

Bruce Tuckman

A psychologist known for his theory of group development stages: forming, storming, norming, performing, and adjourning.

Group Development

The process through which a group evolves over time, including stages of forming, storming, norming, performing, and adjourning.

Loss Of Individuality

A social process in which individual group members lose self-awareness and its accompanying sense of accountability, inhibition, and responsibility for individual behavior.