Problem:
Imagine that you're the Senior Auditor on the Peach Blossom Cologne Company audit. The Partner on the engagement comes into your office and tells you she's not satisfied with the memo that Jasper Parsons (the former Senior) wrote on Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement. She thinks a little in-house seminar is needed to train everyone and she's given you the job of writing and presenting the seminar. She suggests that you look for an article that she remembered reading in the January 2008 Journal of Accountancy and also that you read the beginning of SAS No. 109. She wants you to email her a word narrative of how you think the firm should approach gaining an understanding of the entity and assess the related risks. Please prepare that memo.