Daniel Charon is the loan officer of the Georgian Bay Bank. Georgian Bay Bank 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 collectibility of the outstanding loan and whether the trucks still exist. He therefore engages Susan Virms, public accountant, to count the trucks, using registration information held by Charon. She 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:
1. Which of the 20 trucks is parked in Regional’s parking lot on the night of June 30?
2. The condition of each truck, using the categories poor, good, and excellent.
3. 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.
(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.