When an auditor performs risk assessment activities and develops a business-based approach to auditing financing activities, _______.

Question

Quizplus · Accepted Answer

Understanding how the entity chooses a financing strategy and the types of financial instruments used by the entity is essential for developing a business-based approach to auditing financing activities. This knowledge will help the auditor assess the risks associated with the financing activities and determine the appropriate audit procedures to perform. While the auditor may provide recommendations related to refinancing arrangements, this is not a primary focus of risk assessment activities. The entity's investing strategy may be important to understand for other audit areas, but it is not directly relevant to auditing financing activities. Similarly, financing an operating strategy is not a commonly used term and does not provide clarity on the specific risks associated with financing activities.

When an Auditor Performs Risk Assessment Activities and Develops a Business-Based