53. To adequately plan an audit, the auditor should obtain sufficient knowledge of the client's business to understand events, transactions, and practices that may havea significant effect on the financial statements. The auditor needs knowledge about, for example, the type of business, including products and services, company locations, and marketing methods.. T OR F 54. The auditor reviews industry data in order to provide an external context to gauge the reasonableness of the entity's activities. The auditor should also learrn about the core processes needed to be competitive in the industry, industry trends, and key aspects of regulations affecting the client. T OR F 55. The auditor tours the client operations which affords the auditor the opportunity to meet personnel who occupy key positions in the organization. It is also essential for the auditor to observe key processes and develop an understanding of the processes, the costs involved, and their importance to the organization. The auditor also needs to observe EDP operations, including physical safeguards. T OR F 56. The auditor makes inquiries of the audit committee. This gives the auditor an opportunity to discuss the scope of the audit with the audit committee. The audit committee may need for the auditor to concentrate on specific issues and may request additions to the planned audit. T ORF