Exam 1: The Demand for Audit and Other Assurance Services

Mega Manufacturing Company (Mega)is thinking about acquiring Localized Small Producer Inc.(LSP),a small manufacturing company that produces related products.Mega has examined the financial statements of LSP,which show only a small profit in the last five years.Management of LSP has taken reasonable salaries,and cost of goods sold is higher than the industry average for LSP.Mega believes that it will be able to introduce operational efficiencies at LSP,improving the profitability of the small company,if acquired. Required:A)What type of engagement should be conducted to assess the operational efficiencies of LSP? Justify your response.B)Who should be engaged to conduct the engagement? C)What major problems might the auditors encounter when conducting the audit and writing the report?

Which of the following is an example of auditing rather than accounting?

An example of a forensic accounting assignment might be

The No-Name Agency conducts an independent service for a company to determine if its suppliers have complied with health and safety regulations,child labour guidelines,and other employee welfare issues.What type of service is No-Name providing?

Frederic is an account manager at a large Canadian bank.Frederic has to decide if the bank will make a loan to Frost Corp,a snow removal company.Further,Frederic has to decide how much they will lend to Frost and at what rate. Assuming that Frederic makes the loan,what factors will he use to decide the rate of interest? What factors are impacted by auditing and how?

To do an audit,it is necessary to have information in a verifiable form and some criteria by which the auditor can evaluate the information. Required:A)What information and criteria would a public accounting firm use when auditing a company's financial statements? B)What information and criteria would a Canada Revenue Agency auditor use when auditing that same company's tax return?C)What information and criteria would an internal auditor use when performing an operational audit to evaluate whether the company's computerized payroll processing system is operating efficiently and effectively?

Blader Ng.Inc.has recently placed new air-cleaning systems in their smokestacks to meet air quality regulations.An auditing firm has been engaged to assess air quality and compare results to legislated requirements.What type of audit or engagement is the auditor conducting?

The Sarbanes-Oxley Act requires the auditor to attest to the

Which of the following is most difficult to evaluate objectively?

What is the most appropriate method for an organization to lower information risk related to its financial statements?

A major type of assurance service performed by large public accounting firms is

Which of the following organizations establishes ethical standards and standards for the practice of Internal Auditing?

One of the reasons that an auditor must be competent is so that they can

The internal audit group typically reports directly to the

Which of the following illustrates the definition of auditing with respect to the reporting process?

A review of any part of an organization's procedures and methods for the purpose of evaluating efficiency and effectiveness is classified as a(n)

Discuss the differences and similarities between the roles of accountants and auditors.What additional expertise must an auditor possess beyond that of an accountant?

Which of the following audits can be regarded as being solely "compliance" audits?

Which of the following services provides no assurance about the client's financial statements?

As part of its loan agreement,Big Bank requires that only accounts receivable less than 60 days old be used as collateral.An auditor has been engaged to provide assurance that the accounts receivable on the list provided to the bank are indeed less than 60 days old.What type of engagement is the auditor conducting?