Acco 360 quiz 1

School: Concordia University - Course: ACCO 360 - Subject: Accounting

Question 1. CHAPTER 1 Consumers Union is a non-profit organization that provides information and counsel on consumer goods and services. A major part of its function is the testing of different brands of consumer products that are purchased on the open market and then the reporting of the results of the tests in Consumer Reports, a monthly publication. Examples of the types of products it tests are middle-sized automobiles, residential dehumidifiers, flat-screen TVs, and boys' jeans. Required 1 In what ways are the services provided by Consumers Union similar to assurance services provided by public accounting firms? Test and issue an opinion Improve quality of information for decisions makers Both auditors / consumer union - information is correct Both independent and competent Reduce information risk Required 2 What characteristics do you think a reliable consumer evaluation service would have? How do those characteristics compare to those of a reliable auditor? Competent and independent Required 3 What incentives or pressures might cause Consumers Union not to perform its responsibilities? Economic pressure: cost of testing the product/ audit testing Social pressure: pressure by the manufacturer (companies could be pressured for good reviews and the client wants a good audit report Required 4 Compare the concept of information risk faced by a shareholder of Toyota when using the financial statements with the information risk problem faced by a buyer of a Toyota automobile. Both shareholders and the buyers are looking at the information given by consumer or audit to make a decision therefore both are relying on these reports to make a decisions Information may not be accurate Required 5 Compare the four causes of information risk faced by users of financial statements as discussed in this chapter with those faced by a buyer of an automobile Remoteness of information:not all information is available Biases of the provider: sell the good does not mention the bad Required 6

Compare the three ways users of financial statements can reduce information risk with those available to a buyer of an automobile. Verify the information yourself Share the risk with management Look at auditor's report Question 2 CHAPTER 2 Sarah O'Hann enjoyed taking her first auditing course as part of her undergraduate accounting program. At home during her semester break, she and her father discussed the class and it was clear that he didn't really understand the nature of the audit process, as he asked the following questions: