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 public accounting firms?
b. What characteristics do you think a reliable consumer evaluation service would have? How do those characteristics compare to those of a reliable auditor?
c. What incentives or pressures might cause Consumers Union not to perform its responsibilities?
d. What incentives and pressures might cause an auditor not to perform its responsibilities?
e. 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.
f. 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.
g. Compare the three ways users of financial statements can reduce information risk with those available to a buyer of an automobile.