1-19 a. The following parts of the definition of auditing are related to the narrative:
Altman is being asked to issue a report about qualitative and quantitative information for trucks. The trucks are therefore the information with which the auditor is concerned.
There are four established criteria which must be evaluated and reported by Altman: existence of the trucks on the night of June 30, 2019, ownership of each truck by Regional Delivery Service, physical condition of each truck and fair market value of each truck.
Samantha Altman will accumulate and evaluate four types of evidence:
Count the trucks to determine their existence.
Use registration documents held by Burrow for comparison to the serial number on each truck to determine ownership.
Examine the trucks to determine each truck's physical condition.
Examine the blue book to determine the fair market value of each truck.
1-19 (continued)
Samantha Altman, CPA, appears qualified, as a competent, independent person. She is a CPA, and she spends most of her time auditing used automobile and truck dealerships and has extensive specialized knowledge about used trucks that is consistent with the nature of the engagement.
The report results are to include:
which of the 25 trucks are parked in Regional's parking lot the night of June 30.
whether all of the trucks are owned by Regional Delivery Service.
the condition of each truck, using established guidelines.
fair market value of each truck using the current blue book for trucks.
The only parts of the audit that will be difficult for Altman are:
Evaluating the condition, using the guidelines of poor, good, and excellent. It is highly subjective to do so. If she uses a different criterion than the "blue book," the fair market value will not be meaningful. Her experience will be essential in using this guideline.
Determining the fair market value, unless it is clearly defined in the blue book for each condition.
1-20 a. The major advantages and disadvantages of a career as an IRS agent, CPA, GAO auditor, or an internal auditor are:
EMPLOYMENT
ADVANTAGES
DISADVANTAGES
INTERNAL
REVENUE
AGENT
Extensive training in individual, corporate, gift, trust and other taxes is available with concentration in area chosen.
Hands-on experience with sophisticated selection techniques.Experience limited to taxes.
No experience with operational or financial statement auditing.
Training is not extensive with any business enterprise.
1-20 (continued)
EMPLOYMENT
ADVANTAGES
DISADVANTAGES
CPA
Extensive training in audit of financial statements, compliance auditing and operational auditing.
Opportunity for experience in auditing, tax consulting, and management consulting practices.
Experience in a diversity of enterprises and industries with the opportunity to specialize in a specific industry.Exposure to taxes and to the business enterprise may not be as in-depth as the internal revenue agent or the internal auditor.
Likely to be less exposed to operational auditing than is likely for internal auditors.
INTERNAL
AUDITOR
Extensive exposure to all segments of the enterprise with which employed.
Constant exposure to one industry presenting opportunity for expertise in that industry.
Likely to have exposure to compliance, financial, and operational auditing.Little exposure to taxation and the audit of taxes.
Experience is limited to one enterprise, usually within one or a limited number of industries.
GAO AUDITOR
Increasing opportunity for experience in operational auditing.
Exposure to highly sophisticated statistical sampling and computer auditing techniques.Little exposure to diversity of enterprises and industries.
Bureaucracy of federal government.
The two best choices for the senior interested in becoming a certified fraud examiner would be starting out as either a CPA or an internal auditor. A CPA gains experience with internal controls and has an understanding of incentives and opportunities to commit fraud. An internal auditor gains experience with internal controls and has an in-depth understanding of operations and the many facets of a business. IRS agents and GAO auditors would be in demand for fraud examinations relating specifically to tax fraud or governmental entities.
Other auditing careers that are available are:
Auditors within many of the branches of the federal government (e.g., Department of Homeland Security)
Auditors for many state and local government units (e.g., state insurance or bank auditors)