When Obtaining an Understanding of the Entity and Its Environment,the

question 15

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 client.
• C) Serve as a basis for setting audit risk and materiality.
• D) Decide whether to perform an audit for the client.

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Definitions:

Minority Group

A sociological term referring to a category of people differentiated from the social majority, often marked by differences in race, ethnicity, culture, or sexual orientation.

Refugees

Individuals who flee their country due to fear of persecution, conflict, violence, or other circumstances that seriously disturb public order and require international protection.

Tokenism

The practice of making only a perfunctory or symbolic effort to be inclusive to members of minority groups, especially by recruiting a small number of people from underrepresented groups in order to give the appearance of equality within a workforce.

Cognitive Dissonance

A psychological phenomenon where an individual experiences discomfort or distress due to holding conflicting beliefs, attitudes, or values.