Step 2 of the planning process is the risk assessment phase.At this stage of the planning process the objective of the auditor is to identify and assess the risk of material misstatement.The auditor does this by
A)gaining an understanding of the company and its management,including the company's financial controls
B)gaining an understanding of the company's industry,including the company's competition
C)developing an audit strategy to respond to the risk of material misstatement
D)performing risk assessment procedures to assess the risk of material misstatement at the financial statement and assertion level

Question

Quizplus · Accepted Answer

The risk assessment phase focuses on identifying and assessing the risk of material misstatement. To do this, the auditor must perform risk assessment procedures to assess the risk of material misstatement at the financial statement and assertion level. A and B are important steps in gaining an understanding of the company and its industry, but they are not specifically related to assessing the risk of material misstatement. C is more of a result of the risk assessment phase, as developing an audit strategy is the next step in responding to the identified risks.

Step 2 of the Planning Process Is the Risk Assessment