Auditing

1.

a. A public account firm would use the criteria set out according to the generally accepted accounting principles (GAAP) with the information from the financial statements such as balance sheet, income statement, statement of retained earnings and cash flow statement. The audit firm would also require information on the company that is being audited such as the industry and its regulatory and operating environment as well as its business strategies, processes, and indicators and benchmarks.

b. A Canada Revenue Agency auditor would use information from the company's income tax return as well the criteria from the income tax act. An auditor would require source documents from the company's accounting department in addition to the financial statements.

c. An internal auditor would use various pieces of information to evaluate efficiency and efficacy. The information can include costs associated with the payroll department such as software costs, labour costs. Additionally, they would use statistical information such as number of transactions, number of new hires and terminations, total number of timecards, and total number of errors that have occurred. The criteria would be based upon the goal or benchmark set out by the company as to their quantifiable level of efficiency and effectiveness for the computer system.

2.

d. There are several areas where direction may not be provided. They can include determining the basis on judging management's honesty, auditor's competence in understanding overall scope, specific audit execution plan, and list of controls.

e. Positive aspects of less directed standards and recommendations: Auditors are forced to use their own judgement and experience to establish criteria that is most relevant to the specific case and not forced to conform to a rigid plan that may not be pertinent or inclusive to their case at hand.

Negative aspects: Auditors will have too much freedom and...