Final Answer:
The given statement "Risk assessment is the entity's identification and analysis of relevant risks to the achievement of its objectives, forming a basis for determining how the risks should be managed" is true. Thus the correct option is a. true.
Step-by-step explanation:
Risk assessment involves the systematic process of identifying, evaluating, and analyzing potential risks that may affect an entity's ability to achieve its objectives. This process forms the foundation for understanding the nature and impact of these risks on the organization.
Firstly, the identification phase involves recognizing and defining the risks that could hinder the entity's goals, encompassing various factors such as financial, operational, compliance, and strategic risks.
Secondly, the analysis stage delves deeper into these identified risks, assessing their likelihood of occurrence and potential impact. This step aids in prioritizing risks based on their severity and likelihood.
Furthermore, this comprehensive understanding gained through risk assessment serves as a basis for developing strategies to manage, mitigate, or respond to these risks. It assists in making informed decisions regarding resource allocation and establishing risk management frameworks tailored to the organization's specific needs.
Ultimately, by conducting a thorough risk assessment, an entity gains insights into its vulnerabilities and establishes a roadmap for effective risk management, thus enhancing its ability to achieve its objectives while minimizing potential setbacks.
Thus the correct option is a. true.