Ron McLellan established his business, McLellan’s Shoes, in 1980. Since then he has run his business as a sole trader. Ron keeps records and his wife helps him prepare basic accounting records. As McLellan’s Shoes has no outside owners, Ron has never seen the need to have his accounts audited. When Chip Masters from Cloud 9 Inc. expressed an interest in buying McLellan’s Shoes in 1995, Ron was asked to provide audited financial reports. Ron discussed his concerns about having an audit with his friend Ernie Black. Ernie is concerned that Ron may forget their conversations and has asked you to prepare a summary of the issues listed below for Ron.

Required

(a) What are the main differences between a financial report audit, an environmental audit and an efficiency audit?

(b) What is the difference between reasonable assurance and limited assurance?

(c) Why would Chip ask that Ron have the financial report for McLellan’s Shoes audited rather than reviewed?

(d) What factors should Ron consider when selecting an accounting firm to complete the McLellan’s Shoes audit?