15 marks ques: Daniel Charon is the loan officer of the Georgian Bay Bank, which has a loan of $540 000 outstanding from Regional Delivery Service Ltd., a company specializing in the delivery of products of all types on behalf of smaller companies. Georgian Bay's collateral on the loan consists of 20 small delivery trucks with an average original cost of $45,000.
Charon is concerned about the collectability of the outstanding loan and whether the trucks still exist. He therefore engages public accountant Susan Virms to count the trucks, using registration information held by Charon. Virms is engaged because she spends most of her time auditing used automobile and truck dealerships and has extensive specialized knowledge about used trucks. Charon requests that Virms issue a report stating:
Which of the 20 trucks are parked in Regional's parking lot on the night of June 30;
The condition of each truck, using the categories poor, good, and excellent; and
The fair market value of each truck using the current "blue book" for trucks, which states the approximate wholesale prices of all used truck models based on the poor, good, and excellent categories.
REQUIRED
a) Identify which aspects of this narrative fit each of the following parts of the definition of auditing:
(1) Information or Assertion.
(2) Established criteria.
(3) Accumulates and evaluates evidence.
(4) Competent, independent person.
(5) Report of results.
b) Identify the greatest difficulties Virms is likely to face doing this assurance engagement.