It is vital that assurance providers have a good understanding of the entity they are providing assurance to and the environment in which it operates, or their work could be meaningless. For example, if they misunderstand the nature of the business, they could miss key risks and items in the financial statements could be seriously misstated. In addition, if they do not understand their client's business, they will be incapable of carrying out an audit in accordance with auditing standards, which could lead to negligence claims.