Question: It is stated in the chapter that understanding a client's business is important to the conduct of an audit. Required a. Explain how an understanding

It is stated in the chapter that understanding a client's business is important to the conduct of an audit.

Required

a. Explain how an understanding of a business and the business environment would be important to the auditor in evaluating accounts such as:

1. Inventory

2. Allowance for uncollectible accounts

3. Warranty liability and warranty expenses

b. Explain how the understanding of the business may provide value-added services that the auditor might be able to use in order to assist a privately held client.

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