Collectively, procedures performed to obtain an understanding of the entity and its environment, including internal controls, represent the auditor's
A) audit strategy.
B) tests of controls.
C) risk assessment procedures.
D) tests of transactions.

Question

Quizplus · Accepted Answer

The procedures performed to obtain an understanding of the entity and its environment, including internal controls, are known as risk assessment procedures. These procedures are used to identify and assess the risks of material misstatement in the financial statements, which in turn helps the auditor to determine the nature, timing, and extent of further audit procedures necessary to obtain sufficient appropriate audit evidence. The audit strategy, tests of controls, and tests of transactions are all further audit procedures that are performed based on the initial risk assessment procedures.

Collectively, Procedures Performed to Obtain an Understanding of the Entity