Required: At this stage, the auditor obtains an understanding of the entity and its environment to anticipate account balances and assertions that are likely to be misstated. Outline the important aspects of understanding Mt. Hood Furniture and its external environment. Discuss the key issues that are present in the Mt. Hood case.
I need to complete a table. For each of the items listed below, I need to discuss 1) how the knowledge will assist in developing a knowledgeable perspective about the financial statements and 2) how the knowledge increases or mitigates potential risks of material misstatement.
a. Industry conditions
b. Regulatory environment
c. Other external factors affecting the business
d. The client's business operations
e. The client's investing activities and financing activities
f. The client's financial reporting activities