Studying the client and industry allows an auditor to:Question 6AnswerSelect one:a.familiarise themselves with the client’s business and the industry in which it operates.b.gain an understanding of any accounting practices or transactions unique to that industry.c.assess the control environment and the attitudes and capability of senior management.d.All of the options are correct.

Understanding the business and using this information appropriately assists the auditor in, exceptSelect one:a.Planning and performing the audit effectively and efficiently.b.Evaluating audit evidence.c.Assessing risks and identifying potential problemsd.Deciding whether to do tests of controls

Analytical procedures used in planning an audit should focus onSelect one:a.Providing assurance that potential material misstatements will be identified.b.Assessing the adequacy of the available evidential matter.c.Enhancing the auditor's understanding of the client's business.d.Reducing the scope of tests of controls and substantive tests.

A proper understanding of the client's internal control is an integral part of the audit planning process. The results of the understandingSelect one:a.Bear no relationship to the extent of substantive testing to be performed.b.May be used as the basis for withdrawing from an audit engagement.c.Must be reported to the shareholders and the SEC.d.Are not reported to client management.

Factors to consider include:The nature, scope, intended use and purpose of the service.The degree of reliance that will be placed on the outcome of the service in the audit.The legal and regulatory environment in which the service is provided.Whether the client is a public interest entity.Whether it is material;The degree of subjectivity involved.The client’s level of expertise concerning the type of service provided.Whether the outcome will affect the accounting records or matters reflected in the financial statements, and, if so:Whether it is material;The degree of subjectivity involved.The extent of the client’s involvement in determining significant matters of judgment.The degree of reliance that will be placed on the outcome of the service in the audit.Whether the client is a public interest entity.The fee for the NAS.

Explain how auditors obtain an initial understanding of the entity, its environment and the applicable financial reporting framework.