When assessing the risk of material misstatements in the financial statements,

Question

Quizplus · Accepted Answer

To assess the risk of material misstatements in the financial statements, the auditor must have an understanding of the client's business and industry. This allows them to identify and understand risks that could impact the financial statements. A) Inadequate internal control procedures increase client business risk, which in turn increases the risk of material misstatements. B) GAAS provides general guidance on evidence, but the auditor must use professional judgment to determine the appropriate evidence to obtain. C) While management sets materiality levels, the auditor must assess whether these are appropriate and whether any misstatements above these levels would be considered material.

When Assessing the Risk of Material Misstatements in the Financial