Obtaining an understanding of the entity and its environment, including the entity's internal control, is a continuous, dynamic process of…

Obtaining an understanding of the entity and its environment, including the entity's internal control, is a continuous, dynamic process of gathering, updating and analysing information throughout the audit. The understanding establishes a frame of reference within which the auditor plans the audit and exercises professional judgment throughout the audit, for example, when: Assessing risks of material misstatement of the financial statementsDetermining materiality in accordance with SA 320Considering the appropriateness of the selection and application of accounting policiesIdentifying areas where special audit consideration may be necessary, for example, related party transactions, the appropriateness of management's use of the going concern assumption, or considering the business purpose of transactionsDeveloping expectations for use when performing analytical proceduresEvaluating the sufficiency and appropriateness of audit evidence obtained such as the appropriateness of assumptions and of management's oral and written representations.