An auditor must have a good understanding of the risks associated with a client's industry in order to ensure that the financial statements reflect the underlying substance of accounting transactions and the economic effects of such transactions.

Question

Quizplus · Accepted Answer

An auditor's understanding of the risks associated with a client's industry is critical in designing an appropriate audit plan and identifying areas where material misstatements may occur. This helps the auditor to ensure that the financial statements present a true and fair view of the client's financial performance and position. As such, a good understanding of industry risks is essential for conducting an effective audit.

An Auditor Must Have a Good Understanding of the Risks