For the following statements, indicate whether the answer is True or False. If the answer is False, please explain why.

1. Audit plan relates to the scope, timing and direction of the audit.

2. The external auditor has a responsibility to conduct the audit in such a manner that the risk of material misstatement (of any kind - Fraud or error) in the financial statements is reduced to an acceptable level.

3. Obtaining an understanding of the entity and its environment is not the first step in the audit planning process.

4. Inquiry alone is a sufficient way of obtaining audit evidence.

5. Planning materiality assists the auditor in determining the nature, timing and extent of risk assessment procedures and identifying and assessing the risks of material misstatement.

6. Materiality is only quantitative

7. The auditor responds to high level of risk at the Financial Statement level by performing more substantive procedures and applying professional scepticism.

8. The decision to make use of risk assessments carried out by the client's internal audit department will be made when determining the overall audit strategy.

9. This is the relationship between risk and materiality: The higher the risk, the higher the materiality.

10. To obtain an understanding of the entity and its environment, the auditor needs to consider the external factors, internal factors as well as regulatory factors.