Auditing, and Assurance Services: an Integrated Approach Discussion Question 1-18

640 Words Feb 4th, 2013 3 Pages
Consumers Union is a nonprofit 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
a. In what ways are the services provided by Consumers Union similar to assurance services provided by CPA firms?
b. Compare the concept of information risk introduced in this chapter with the information risk problem faced by a buyer of an automobile.
c. Compare the
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The automobile buyer does have the advantage of possibly knowing other users who are satisfied or dissatisfied with a similar automobile.

(2) Biases and motives of provider There is a conflict between the automobile buyer and the manufacturer. The buyer wants to buy a high quality product at minimum cost whereas the seller wants to maximize the selling price and quantity sold.

(3) Voluminous data There is a large amount of available information about automobiles that users might like to have in order to evaluate an automobile. Either that information is not available or too costly to obtain.

(4) Complex exchange transactions The acquisition of an automobile is expensive and certainly a complex decision because of all the components that go into making a good automobile and choosing between a large number of alternatives.

d. The three ways users of financial statements and buyers of automobiles reduce information risk are also similar:

(1) User verifies information him or herself That can be obtained by driving different automobiles, examining the specifications of the automobiles, talking to other users and doing research in various magazines.

(2) User
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