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NEW QUESTION: 1
An auditor is required to establish an understanding with a client regarding the services to be performed
for each engagement. This understanding generally includes:
A. Management's responsibility for providing the auditor with an assessment of the risk of material
misstatement due to fraud.
B. Management's responsibility for identifying mitigating factors when the auditor has doubt about the
entity's ability to continue as a going concern.
C. The auditor's responsibility for ensuring that those charged with governance are aware of any
significant deficiencies in internal control that come to the auditor's attention.
D. The auditor's responsibility for determining the preliminary judgments about materiality and audit risk
factors.
Answer: C
Explanation:
Explanation/Reference:
Explanation:
Choice "C" is correct. An understanding between the auditor and the client generally includes the auditor's
responsibilities. One of the auditor's responsibilities is to ensure that those charged with governance (e.g.,
the audit committee) are aware of any significant deficiencies in internal control that come to the auditor's
attention.
Choice "A" is incorrect. An understanding between the auditor and the client generally would not include
the auditor's responsibility for determining preliminary judgments about materiality and audit risk factors, as
an understanding generally is not obtained with respect to audit procedures or specific audit assessments.
Choice "B" is incorrect. Management is not responsible for identifying mitigating factors when the auditor
has doubt about the entity's ability to continue as a going concern. The auditor, however, would look for
and evaluate mitigating factors to determine if such factors alleviate doubt about the entity's ability to
continue as a going concern.
Choice "D" is incorrect. Management is not responsible for providing the auditor with an assessment of the
risk of material misstatement due to fraud. The auditor, however, is responsible for making such an
assessment.