John and Millie are working on the audit of Bloom LLC and have been asked by their supervisor to help plan the audit.

Their supervisor has informed them that the audit planning stage is one of the most important because the auditors

need to accurately gauge the client's level of inherent risk. Which of the following statements best describes the

relationship between the audit planning stages and evaluation of inherent risk?

The client is heavily involved with assisting the auditor in planning the audit. The client should help the

auditor determine what areas to audit, and when each part of the audit should be conducted.

The auditor should spend considerable time in the planning stages of the audit. For a multitude of reasons,

including potential future liability for the auditor, the audit firm should gain a sound understanding of the

client and areas where inherent risk may be higher.

The auditors typically spend a considerable amount of time gaining an understanding of the client, as well as

the industry in which the client operates. This increased understanding helps the auditor to form qualified

opinions on certain areas of the client's business which have been deemed to represent higher inherent risk.

None of these answer choices are correct.