Understanding Entity And Environment

Question 1

Entity and environment

Answer 1

Here are the simplified smart notes:

Understanding the Entity and Its Environment

1. Entity’s organizational structure, ownership, and governance
2. Business model and use of IT
3. Industry, regulatory, and external factors
4. Internal and external performance measures

Financial Reporting Framework

1. Applicable financial reporting framework
2. Entity’s accounting policies and changes
3. Inherent risk factors affecting financial statement assertions

Business Risks

2. Risks due to significant conditions, events, circumstances, actions, or inactions that affect the entity ability to achieve its objective and implement it’s strategies
3. Risks due to inappropriate objectives, strategies, or goals