Question 1
Auditors should understand client objectives related to
◦ reliability of financial reporting.
◦ effectiveness and efficiency of operations.
◦ compliance with laws and regulations.
◦ All of these.
Question 2
In order to obtain an understanding of the client's business, the audit firm will consider
◦ inherent and control risk of the client.
◦ audit risk to the CPA firm.
◦ the client's business risk and the risk of material misstatements in the financial statements.
◦ the CPA firm's potential ongoing revenue from the audit client.