The second stage in audit risk assessment is to _______.
A)gain an understanding of the client's system of internal controls
B)prevent fraud
C)use subjective measurement in financial statements
D)focus on the significant transactions outside of the client's normal course of business

Question

Quizplus · Accepted Answer

The second stage in audit risk assessment is to gain an understanding of the client's system of internal controls. This involves assessing the effectiveness of the client's internal controls over financial reporting, which helps the auditor to identify any risks of material misstatement in the financial statements. Option B is incorrect as preventing fraud is the responsibility of the management and the auditor's role is to detect material misstatements, which may result from fraud. Option C is incorrect as objective measurement is preferred to subjective measurement in financial statements. Option D is incorrect as the auditor should focus on significant transactions within the client's normal course of business as well as important events or transactions outside the client's normal course of business.

The Second Stage in Audit Risk Assessment Is to _______