1) Why is there a need for the auditor to obtain a preliminary understanding of the client and its environment? How does this process impact the client engagement process of an audit?

2) What information is the auditor seeking when obtaining a preliminary understanding of the client?

3) How do industry, regulatory and external factors affect the environment of the audit client and the auditor's understanding of the client?

4) What is meant by nature of an entity?

5) Discuss the concept of business risk and its importance to an audit of financial statements.

6) How does an understanding of internal control help the auditor in understanding the client?