Final answer:
The incorrect option among the auditor's assessment procedures for understanding an entity and its environment is 'B) Compute the level of detection risk,' as this relates to planning audit procedures rather than understanding the entity itself.
Step-by-step explanation:
To answer the student's question, the auditor obtains an understanding of the entity and its environment by performing a variety of assessment procedures to reduce the risk of an incorrect audit opinion. These procedures include: A) Inquiries of management and others, where information is gathered from customers and other stakeholders; C) Analytical procedures, which involve comparisons and relationships to identify any unusual or unexpected trends or ratios; and D) Observation and inspections, which help in finding expert information and doing a root cause analysis to determine any underlying issues. The procedure that is not directly related to obtaining an understanding of the entity is B) Compute the level of detection risk. This is a concept within the audit risk model that is used to determine the nature, timing, and extent of auditing procedures and not for gaining an initial understanding of the entity.