Understanding the significance of the purchasing cycle to the entity _______.
A)provides a context for important risk assessments
B)helps the auditor to understand if the entity is overstaffed or understaffed
C)has important implications on the financing cycle
D)is of only peripheral importance to the auditor, due to its extremely low risk assessment.

Question

Quizplus · Accepted Answer

Understanding the purchasing cycle is important for the auditor in assessing the risk of material misstatements in the financial statements, particularly related to fraud or error in the purchasing process. Therefore, it provides a context for important risk assessments.

Understanding the Significance of the Purchasing Cycle to the Entity