a. Explain in your own words what problems an audit can solve for decision-makers (especially investors/creditors) and how this relates to the cost of capital.

b. Explain how the assertions help an auditor connect audit procedures to risks of errors in the financial statements and help managers think about internal controls to prevent errors.

c. Define in your own words 'professional skepticism'. Give an example of a situation where a professional would exercise it. Give an example of a negative consequence that can result from a failure to practice professional skepticism.