Final answer:
The audit team gathers information about a new client's business and industry in order to understand how economic events affect the company's financial statements and assess the internal control system for financial reporting.
Step-by-step explanation:
The audit team gathers information about a new client's business and industry in order to obtain an understanding of how economic events and transactions have an effect on the company's financial statements. This allows the auditors to assess the accuracy and completeness of the financial information presented. By understanding the business and industry, they can verify that the financial statements are free from material misstatement and provide a true and fair view of the company's financial position.
Gathering information about the business and industry also helps the auditors gain an understanding of the clients internal control system for financial reporting. With this knowledge, they can identify and assess any weaknesses or inefficiencies in the internal control system, which could increase the risk of fraud or errors in the financial statements.