It is important for the auditor to obtain a good understanding of the client's industry to develop a client risk profile.If the auditor is looking at a client in the fashion clothing industry,a risk specific to the industry would be
A)the high risk of poor governance and management oversight.
B)the high risk of defective products.
C)the high risk of obsolescence of their inventory.
D)the volatility in the stock market with regards to common stock.

Question

Quizplus · Accepted Answer

The fashion clothing industry is known for its high demand for new and trendy designs, which can quickly make current inventory obsolete. Therefore, the risk of obsolescence of their inventory is a significant and specific risk to this industry. Option A is a risk specific to governance and management oversight, which may not be prevalent in the fashion clothing industry. Option B is a risk of defective products, which may be prevalent in many different industries. Option D refers to volatility in the stock market and is not specific to any particular industry.

It Is Important for the Auditor to Obtain a Good