On what basis is an auditable entity's risk rating assigned?

An auditable entity's risk rating is primarily assigned based on prior audit reports and key regulations. This approach allows the auditor to evaluate the historical performance and compliance of the entity in relation to its regulatory environment. Previous audits provide significant insights into known issues, vulnerabilities, and patterns that may affect the entity's risk profile. Additionally, key regulations outline the legal and regulatory framework within which the entity operates, highlighting areas of compliance that are critical for assessing risk.

By focusing on historical data and regulatory requirements, auditors can more accurately determine potential risks, prioritize audit efforts, and allocate resources effectively. This method creates a more informed basis for understanding the entity's risk environment and contributes to a robust audit plan that addresses the most significant risks identified.

The other options, while relevant in their own contexts, do not collectively provide a comprehensive basis for assessing the entity's risk rating in the same way that prior audit reports and regulations do. For instance, employee feedback may offer insights into operational risks, and performance metrics can reflect the effectiveness of management. However, these factors alone do not capture the full spectrum of compliance and previous findings necessary for a thorough risk assessment. Similarly, market share and business growth provide a view of the entity's economic standing but do not inherently encompass