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Questions and Answers
Which of the following is NOT a special audit consideration?
Which of the following is NOT a special audit consideration?
- Industry factors
- Regulatory factors
- External factors
- Internal factors (correct)
What is business risk?
What is business risk?
- The risk of not meeting audit objectives
- The risk of not understanding the entity's environment
- The risk that objectives and strategies won't be met (correct)
- The risk of not understanding accounting principles
How can new strategies or products affect asset valuation?
How can new strategies or products affect asset valuation?
- They have no effect on asset valuation
- They can increase the risk of material misstatements (correct)
- They can decrease the risk of material misstatements
- They can only affect liability valuation
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Study Notes
- Audit planning involves risk assessment procedures.
- Understanding the entity and its environment is crucial.
- Special audit considerations include industry, regulatory, and external factors.
- Understanding the nature of the entity helps the auditor understand transactions and balances.
- Business operations include the nature of the business, products, and key customers.
- Financing and debt structure are important financial considerations.
- Accounting principles and industry-specific practices are relevant.
- Business risk is the risk that objectives and strategies won't be met.
- Understanding business risks helps identify potential material misstatements.
- New strategies or products can affect risks related to asset valuation.
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