Tutorial 1 -Audit and Assurance

Question 1:

XYZ Product Evaluators is a nonprofit organization dedicated to offering insights and guidance
on various consumer products and services. A significant aspect of its mission involves conducting
thorough assessments of diverse brands of consumer goods acquired from the open market. The
evaluation results are then disseminated through XYZ Product Evaluators' platform, which includes
both digital and monthly print publications. Products under scrutiny encompass a wide range,
including electric scooters, kitchen appliances, smartwatches, and athletic shoes.

a. In what ways do the services provided by XYZ Product Evaluators resemble the assurance
services offered by professional auditing firms (e.g., ABC Audit Services)?

b. Compare the concept of information risk introduced in class and in the book with the
information risk challenges confronted by a consumer purchasing an electric scooter.

c. Analyze the four causes of information risk discussed in class in the context of consumers
considering the purchase of a product like an electric scooter.

d. Assess the three methods users of financial statements can employ to reduce information risk
and discuss how these strategies align with those available to a consumer contemplating the
purchase of a product like an electric scooter.

Question 2

You are preparing the accountancy exam and working as a junior accountant for the audit firm
OSRAM LLP. You are learning about the needs of audit and why it is related with accounting
scandals. This includes the Tesco, Carillion and Patisserie Valerie scandals. You know that since
then there has been stricter regulation of audits. However, you continue to read on the newspaper
hear some Audit managers and Partners at the firm discussing what the impact would be of more
audit regulation in the coming years

Discuss the following with reference to the scenario above:

• Why is there the need to regulate auditors?

• Where does the regulation come from? And does this vary in different parts of the world?

• Why do you think there might be the need for more audit regulation?
 • Read about one of the recent audit scandals and discuss what has been the impact on the
regulation?

Question 3

Robert Anderson is the loan officer for City Bank of Houston. City Bank has extended a loan of
$550,000 to Metro Logistics Solutions, a company specializing in logistics and transportation
services for various businesses. City Bank's loan collateral consists of 30 delivery vans with an
average original cost of $30,000.

Anderson expresses concerns about the loan's collectibility and the current status of the vans. To
address these concerns, he engages Sarah Turner, CPA, to conduct a thorough assessment of the
vans, leveraging her expertise in auditing automobile and truck dealerships. Turner is specifically
tasked with issuing a report that covers the following aspects:

1. Identify which of the 30 vans is parked in Metro Logistics Solutions' parking lot on the night of
June 30, 2023.

2. Confirm whether all the vans are owned by Metro Logistics Solutions.

3. Assess the condition of each van, categorizing them as poor, good, or excellent based on
industry guidelines.

4. Determine the fair market value of each van, utilizing the current "blue book" for trucks, which
provides approximate wholesale prices for all used truck models. Additionally, assess the values
considering the guidelines for poor, good, and excellent conditions.

This engagement ensures a comprehensive evaluation of the loan collateral, providing critical
information for assessing the loan's risk and overall financial health.

For each of the following parts of the definition of auditing, state which part of the

preceding narrative fits the definition:

(1) Information

(2) Established criteria

(3) Accumulating and evaluating evidence

(4) Competent, independent person

(5) Reporting results

b. Identify the greatest difficulties Sara Turner is likely to have doing this audit