Question: Katherine Whipple of Food Queen Grocery Inc has asked you

Katherine Whipple of Food Queen Grocery, Inc., has asked you and your team to meet with her concerning a possible attest engagement relating to the assertion that Food Queen has the lowest overall prices of all grocery stores in the Salt Lake City area. Food Queen has just recently moved into the Salt Lake City area and is trying to establish a high-volume, profitable position. Whipple has suggested to you that she believes that while Food Queen certainly doesn’t have the lowest prices on all of the 25,000 types of items it sells, on most any rational basis she believes that its prices are “on the whole” lower than the competition—Albros, Kruegers, and Safest. In thinking about this, you realize that to perform such an attestation engagement, suitable criteria must be used to evaluate the subject matter.
a. For this engagement, what would you consider to be the subject matter?
b. Provide an approach on how one might derive suitable criteria for such an engagement, given that costs are considered lowest on an overall basis, but not necessarily for every item.
c. Discuss the nature of the required assertion from management for an engagement such as this.
Now consider the following: Whipple has suggested to you that when the engagement is complete she will use the results as part of an advertising campaign in which the ads suggest that Food Queen has the “certified lowest overall costs.” When you asked her what would happen if the engagement revealed that Food Queen didn’t have the lowest prices, she suggested that she would simply not use the report and wait a month or two and have you perform another engagement when she had had time to bring her prices down even lower.
d. Are attestation engagements acceptable when the resulting report is to be used for advertising purposes?
e. Assume that your examination revealed that, based on the criteria developed, Whipple’s assertion that Food Queen did have the lowest prices was fairly stated and that a general-use report was proper. Outline the nature of the allowable presentation in the advertising materials.

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  • CreatedOctober 27, 2014
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