Chap005 (1).Doc Uli

Chapter 05 - Audit Planning and Types of Audit Tests

CHAPTER 5AUDIT PLANNING AND TYPES OF AUDIT TESTS

Answers to Review Questions

5-1 The auditor should inquire of the prospective client's bankers and attorneys, credit agencies, and other members of the business community who may have knowledge about the integrity of the prospective client and its management.

5-2 The successor auditor is responsible for initiating the communication with the predecessor auditor. However, the successor auditor should request permission of the prospective client before contacting the predecessor auditor. The successor auditor's communication with the predecessor auditor should include questions related to the integrity of management, disagreements with management over accounting and auditing issues, and the predecessor auditor's understanding of the change in auditors.

5-3 An engagement letter is used to formalize the arrangement reached between the auditor and client. It serves as a contract that outlines the responsibilities of both parties and is intended to prevent misunderstandings between the two parties. The letter states the responsibilities of the auditor and management, that the audit will be conducted in accordance with auditing standards, that certain types of audit procedures will be conducted and written representations will be obtained from management, and that the audit may not detect all material errors and fraud. Exhibit 5-1 in the text contains a sample engagement letter. In addition, the engagement letter might include: Arrangements involving the use of specialists or internal auditors. Any limitation of the liability of the auditor or client, such as indemnification to the

auditor for liability arising from knowing misrepresentations to the auditor by management. (Note that regulatory bodies, such as the SEC, may restrict or prohibit such liability limiting arrangements.)

Additional services to be provided relating to regulatory requirements Arrangements regarding other services (e.g., assurance, tax or consulting services).

5-4 The following factors can be used to judge the competence of the internal auditors: Educational level and professional experience. Professional certification and continuing education. Audit policies, procedures, and checklists. Practices regarding their assignments. The supervision and review of their audit activities. The quality of their working paper documentation, reports, and recommendations Evaluation of their performance.The objectivity of internal auditors can be determined by assessing the following factors: The organizational status of the internal auditor responsible for the internal audit

function. Policies to maintain internal auditors' objectivity about the areas audited.

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5-5 An audit committee is a subcommittee of the board of directors composed of independent members. The audit committee is responsible for the financial reporting and disclosure process. The committee should encourage fair reporting from the perspective of the stockholders, creditors, and employees. The audit committee should meet regularly with the external and internal auditors, providing for the independence of the external and internal auditors.

5-6 The auditor should be guided by the results of the risk assessment procedures performed to gain the understanding of the entity. Additional steps that should be performed include the following: Assess the need for specialists. Assess the possibility of illegal acts. Identify related parties. Conduct preliminary analytical procedures. Consider additional value-added services.

5-7 The first type of illegal acts includes violations of laws and regulations, such as tax laws, that are generally recognized as having a direct and material effect on the determination of financial statement amounts. Other illegal acts are violations of laws or regulations such as the Securities Acts, the Occupational Safety and Health Act, Food and Drug Administration regulations, environmental protection laws, equal employment statutes, and price fixing or other antitrust violations that may have a material but indirect effect on the financial statements.Circumstances that may indicate a possible illegal act include the following: Unauthorized transactions, improperly recorded transactions, or transactions not

recorded in a complete or timely manner. Investigation by a government agency, enforcement proceeding, or payment of

unusual fines or penalties. Violations of laws or regulations cited in reports of examinations by regulatory

agencies. Large payments for unspecified services to consultants, affiliates, or employees. Sales commissions or agents' fees that appear excessive. Large payments in cash or bank cashiers' checks. Unexplained payments to government officials. Failure to file tax returns or pay government duties.

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5-8 The auditor can identify related parties by (1) evaluating the client’s procedures for identifying related parties, (2) requesting a list of related parties from management, and (3) reviewing filings with the SEC and other regulatory agencies. Some additional audit procedures that may identify transactions with related parties include: Review the minutes of the board of directors and executive or operating committees

for information about material transactions authorized or discussed at their meetings. Review conflict-of-interest statements obtained by the company from management. Review the extent and nature of business transacted with major customers, suppliers,

borrowers, and lenders for indications of previously undisclosed relationships. Review accounting records for large, unusual, or nonrecurring transactions or

balances, paying particular attention to transactions recognized at or near the end of the reporting period.

Review confirmations of loans receivable and payable for indications of guarantees. If guarantees are identified, determine their nature and the relationships of the guarantor to the entity.

5-9 The three general types of audit tests are risk assessment procedures, tests of controls and substantive tests. Risk assessment procedures are used by the auditor to obtain an understanding of the entity and its environment, including internal control. Examples include inquiries of management and others, analytical procedures, and observation and inspection. Tests of controls are audit procedures performed to test the operating effectiveness of controls in preventing or detecting material misstatements at the relevant assertion level. Examples of tests of controls include inquiries of appropriate client personnel, inspection of documents and reports, observation of the application of a specific internal control, and reperformance of the application of the control by the auditor.

Substantive procedures are performed to detect material misstatements (i.e., monetary errors) in an account balance, transaction classes, and disclosure components of the financial statements. Examples of substantive procedures are substantive tests of transactions, substantive analytical procedures, and tests of details of account balances.

5-10 The purposes for using analytical procedures at the planning stage of an audit are (1) to enhance the auditor's understanding of the client's business and the transactions and events that have occurred since the last audit and (2) to identify areas that may represent risks relevant to the audit.

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5-11 The quality of an expectation is referred to as the precision of the expectation. Precision is a measure of the potential effectiveness of an analytical procedure; it represents the degree of reliance that can be placed on the procedure. Precision is a measure of how closely the expectation approximates the unknown “correct” amount. The degree of desired precision will differ with the specific purpose of the analytical procedure. The precision of the expectation is a function of the materiality and required detection risk for the assertion being tested. If the assertion being tested requires a low level of detection risk, the expectation needs to be very precise. However, the more precise the expectation, the more extensive and expensive are the audit procedures used to develop the expectation, resulting in a cost/benefit trade-off.

The second step in the substantive analytical procedures decision process is to define or calculate a tolerable difference. Since the expectation developed by the auditor will rarely be identical to the client's recorded amount, the auditor must decide the amount of difference that would require further investigation. The size of the tolerable difference depends on the significance of the account, the desired degree of reliance on the analytical procedure, the level of disaggregation in the amount being tested, and the precision of the expectation. Auditors often use rules of thumb such as, “tolerable difference is 10% of the predicted amount and/or a difference less than $75,000.”

5-12 Explanations for significant differences observed for substantive analytical procedures must be followed up and resolved through quantification, corroboration, and evaluation.Quantification: Quantification involves determining whether the explanation or error can explain the observed difference. This may require the recalculation of the expectation after considering the additional information. For example, a client may offer the explanation that the inventory account increased by a certain percentage as compared to the prior year due to a 12 percent increase in raw materials prices. The auditor should compute the effects of the raw materials price increase and determine the extent to which the price increase explains (or does not explain) the increase in the inventory account.Corroboration: Auditors must corroborate explanations for unexpected differences by obtaining sufficient competent audit evidence linking the explanation to the difference and substantiating that the information supporting the explanation is reliable. This evidence should be of the same quality as the evidence obtained to support tests of details. Common corroborating procedures include examination of supporting evidence, inquiries of independent persons, and evaluating evidence obtained from other auditing procedures. Evaluation: Evaluation involves the effective use of professional skepticism, combined with the desire to obtain sufficient competent audit evidence, similar to other auditing procedures. The auditor should evaluate the results of the substantive analytical procedures to conclude whether the desired level of assurance has been achieved. If the auditor obtains evidence that a misstatement exists and can be sufficiently quantified, the auditor makes note of his or her proposed adjustment to the client’s financial statements.

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5-13 The Audit Testing Hierarchy starts with tests of controls and substantive analytical procedures because they are generally both more effective and more efficient than starting with tests of details (i.e., substantive tests of transactions and substantive tests of account balances and disclosures).

5-14 Some of the buckets are larger than others because certain assertions will be more important or present bigger risks for some accounts than for others. For instance, existence (or validity) is typically more important for accounts receivable than it is for accounts payable. After the auditor has determined the risks associated with the assertions for an account balance, she can determine the size of the assurance buckets (i.e., how much assurance is needed) and then begin filling the buckets by applying the audit testing hierarchy.

5-15 There are four categories of financial ratios discussed in the text: short-term liquidity ratios, activity ratios, profitability ratios, and coverage ratios. Short-term liquidity ratios are indicators of the entity's ability to meet its current obligations when they become due. Activity ratios indicate how effectively the entity's assets are managed. Profitability ratios are indicators of the entity's success or failure for a given period. Coverage ratios provide information on the long-term solvency of the entity, including the ability of the entity to continue as a going concern.

Answers to Multiple-Choice Questions

5-16 D 5-23 A5-17 A 5-24 A5-18 A 5-25 C5-19 C 5-26 A5-20 B 5-27 C5-21 D 5-28 B5-22 D

Solutions to Problems

5-29 a. The procedures Hall should perform before accepting the engagement include the following:1. Hall should explain to Adams the need to make an inquiry of Dodd and should

request permission to do so.2. Hall should ask Adams to authorize Dodd to respond fully to Hall's inquiries.3. If Adams refuses to permit Dodd to respond or limits Dodd's response, Hall should

inquire as to the reasons and consider the implications in deciding whether to accept the engagement.

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4. Hall should make specific and reasonable inquiries of Dodd regarding matters Hall believes will assist in determining whether to accept the engagement, including specific questions regarding: Facts that might bear on the integrity of management. Disagreements with management as to accounting principles, auditing

procedures, or other similarly significant matters. Dodd's understanding as to the reasons for the change of auditors.

5. If Hall receives a limited response, Hall should consider its implications in deciding whether to accept the engagement.

b. The additional procedures Hall should consider performing during the planning phase of this audit that would not be performed during the audit of a continuing client may include the following:1. Hall may apply appropriate auditing procedures to the account balances at the

beginning of the audit period and, possibly, to transactions in prior periods.2. Hall may make specific inquiries of Dodd regarding matters Hall believes may

affect the conduct of the audit, such as Audit areas that have required an inordinate amount of time. Audit problems that arose from the condition of the accounting system and

records.3. Hall may request Adams to authorize Dodd to allow a review of Dodd's working

papers.4. Hall should document compliance with firm policy regarding acceptance of a new

client.5. Hall should start obtaining the documentation needed to create a permanent

working paper file.

5-30 a. Prior to acceptance of the engagement, Tish & Field should have communicated with the predecessor auditor regarding: Facts that might bear on the integrity of management. Disagreements with management concerning accounting principles, auditing

procedures, or other significant matters. The predecessor's understanding about the reason for the change. Any other information that may be of assistance in determining whether to accept

the engagement.b. The form and content of engagement letters may vary, but they would generally

contain information regarding:The objective of the audit. The estimated completion date. Management's responsibility for the financial statements. The scope of the audit. Other communication of the results of the engagement. The fact that because of the test nature and other inherent limitations of an audit,

together with the inherent limitations of any system of internal control, there is an unavoidable risk that even some material misstatement may remain undiscovered.

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Access to whatever records, documentation, and other information may be requested in connection with the audit.

Arrangements with respect to client assistance in the performance of the audit engagement.

Expectation of receiving from management written confirmation concerning representations made in connection with the audit.

Notification of any changes in the original arrangements that might be necessitated by unknown or unforeseen factors.

A request for the client to confirm the terms of the engagement by acknowledging receipt of the engagement letter.

The basis on which fees are computed and any billing arrangements.

5-31 Additional procedures to be performed prior to the beginning of field work are: Reading the current year's interim financial statements. Discussing the scope of the examination with management of the client. Establishing the timing of the audit work. Arranging with the client for adequate working space. Coordinating the assistance of client personnel in data preparation. Establishing and coordinating staffing requirements, including time budget. Holding a planning conference with assistants assigned to the engagement and

discuss possible fraud-related issues. Determining the extent of involvement, if any, of consultants, specialists, and internal

auditors. Considering the effects of applicable accounting and auditing pronouncements,

particularly recent ones. Considering the need for an appropriate engagement letter. Preparing documentation setting forth the preliminary audit plan. Making a preliminary judgment about materiality. Making a preliminary judgment about control risk. Updating the prior year's written audit program.

5-32 a. The typical engagement letter generally includes the following: 1. The name and address of the person or persons who retained the auditor to

perform the auditing services. 2. An opening paragraph that confirms the understandings of the auditor and the

client. 3. A summary of significant events that led to the retention of the services of the

auditor. 4. A general description of the CPA firm that will conduct the examination.

5. A statement that the examination will be performed in accordance with PCAOB auditing standards.

6. A description of the scope of the services to be rendered, which should establish the nature of the engagement.

7. Any scope restrictions or special limitations and their effect on the auditor's report.

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8. A statement regarding the auditor's responsibility for the detection of fraud. 9. An indication of the possible use of client personnel in connection with the audit

work to be performed.10. A statement that the auditor will provide a management letter if required in the

circumstances.11. The method and timing of billings as well as billing rates and fee arrangements.12. Space for the client representative's signature, which indicates acceptance of the

letter and the understandings therein.

b. The benefits of preparing an engagement letter include the avoidance of possible problems between the CPA and the client concerning (1) the scope of the work, (2) the service to be rendered, and (3) the audit fee. In addition, the "in-charge" auditor conducting the examination can avoid misunderstanding the nature and scope of the engagement if the engagement letter is included in the permanent section of the audit working papers. The letter should eliminate misunderstandings and confusion about the type of financial statements to be examined, the estimated report date, and the type of opinion expected. In this respect, the letter lessens any problems associated with the first standard of field work, which requires the work to be adequately planned and assistants to be properly supervised. In addition to avoiding possible misunderstandings, any legal problems relating to the auditor's failure to perform certain procedures can be reviewed with reference to the contractual commitment assumed. For example, if scope limitations prevent the auditor from performing normal audit procedures, the auditor cannot be legally responsible if a fraud is not detected when clearly it would have been detected if such procedures were performed. The engagement letter is also useful as a reference document when preparing for future engagements.

5-33 a. An audit committee is an important part of a company's organizational structure. It is a special committee formed by the board of directors. It should be a group of outside (independent) directors who have no active day-to-day operational role and who are a liaison between the independent auditor and the board of directors. The audit committee assists and advises the full board of directors and in doing so aids the board in fulfilling its responsibility for public financial reporting.

b. Audit committees are formed to satisfy the shareholders' need for assurance that directors are exercising due care in the performance of their duties. For public companies they are required by regulation. They may also be formed so that a company can be more responsive to the needs of those interested in financial reporting. Their formation itself is recognition of the responsibilities of both the corporation and its auditor to the public investor. Also, they may be formed to reinforce auditor's independence, particularly the appearance of independence, from the management of a company whose financial statements are being examined by the auditor.

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c. The functions of an audit committee may include the following: Selection of the independent auditor, discussion of audit fee with the auditor, and

review of the auditor's engagement letter. Review of the independent auditor's overall audit plan (scope, purpose, and general

audit procedures). Review of the annual financial statements before submission to the full board of

directors for approval. Review of the results of the auditor's examination including experiences,

restrictions, cooperation received, findings, and recommendations. Matters that the auditor believes should be brought to the attention of the directors or shareholders should be considered.

Review of the independent auditor's evaluation of the company's internal control systems.

Review of the company's accounting, financial, and operating controls. Review of the reports of internal audit staff. Review of interim financial reports to shareholders before the board of directors

approves them. Review of company policies concerning political contributions, conflicts of interest,

and compliance with federal, state, and local laws and regulations, and investigation of compliance with those policies.

Review of financial statements that are part of prospectuses or offering circulars; review of reports before they are submitted to regulatory agencies.

Review of the independent auditor's observations of financial and accounting personnel.

Participation in the selection and establishment of accounting policies; review the accounting for specific items or transactions as well as alternative accounting treatments and their effects.

Review of the impact of new or proposed pronouncements by the accounting profession or regulatory bodies.

Review of the company's insurance program. Review and discussion of the independent auditor's management letter.

5-34 a. If Post discovers that General's financial statements may be materially misstated due to fraud, Post should consider the implications for other aspects of the audit and discuss the matter and approach to further investigation with an appropriate level of management and the audit committee. Post should also attempt to obtain sufficient competent evidence to determine whether, in fact, material fraud exist and, if so, its effect. Post may suggest that General consult with its legal counsel on matters concerning questions of law.

b. If Post is precluded from applying necessary procedures, Post should disclaim or qualify an opinion on the financial statements and communicate these findings to General's audit committee or its board of directors.

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c. If Post concludes that General's financial statements are materially affected by fraud, Post should insist that the financial statements be revised and, if they are not, express a qualified or an adverse opinion on the financial statements, disclosing all the substantive reasons for such an opinion. Additionally, Post should adequately inform General's audit committee or its board of directors about the fraud.

d. Post may have a duty to disclose fraud to third parties outside General's management and its audit committee in the following circumstances: When General reports an auditor change under the appropriate securities law. When a successor auditor appropriately makes inquiries of a predecessor auditor. When responding to a subpoena. When communicating with a funding or other specified agency, as required for

entities that receives financial assistance from a government agency.5-35

Audit Procedure Assertion

1 Accuracy

2 Existence

3 Cutoff

4 Valuation and allocation

5-36 a. Analytical procedures are used for three broad purposes: To assist the auditor in planning the nature, timing, and extent of other auditing

procedures. As a substantive test to obtain evidential matter about particular assertions related to

account balances or classes of transactions. As an overall review of the financial information in the final review stage of the

audit.

b. An auditor's expectations (types of analytical procedures) are developed from the following sources of information: Financial and operating data. Budgets and forecasts. Industry publications. Competitor information.

c. The factors that influence an auditor's consideration of the reliability of data for purposes of achieving audit objectives are whether the Knowledgeable independent source of the evidence. The effectiveness of internal controls. The auditor’s direct personal knowledge. Documentary evidence. Original documents.

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5-37 a. The calculation of the expectation for the reserve for returns account can be made as follows:

Months

Monthly Sales

(in 000s)Historical

Return RateEstimated Returns

July $ 73,300,000 0.004 293,200August 82,800,000 0.006 496,800September 93,500,000 0.01 935,000October 110,200,000 0.015 1653,000November 158,200,000 0.025 3,955,000December 202,500,000 0.032 6,480,000

13,813,000Gross Margin % x 0.425

Auditor expectation $5,870,525

b. We can establish a tolerable difference by applying a percentage (50%) to the planning materiality set for EarthWear of $1,800,000. This results in a tolerable difference of $900,000.

c. The expectation of $5,870,525 is approximately $20,000 less the book value of $5,890,000. Since this amount is less than the tolerable difference of $900,000, the analytical procedure supports the fair presentation of the reserve for returns account.

d. If the difference between the auditor’s expectation and the book value is greater than the tolerable misstatement, the auditor should consider performing the following audit procedures: Review the general journal and general ledger for any unusual entries. Reevaluate the historical return rates. Reevaluate the gross profit margin. Ask the client to adjust the books.

5-38 The accounts receivable turnover is slower for 2007, which implies that the average collection period has increased. Arthur should first satisfy himself that RCT's credit terms remained unchanged over those years. If the credit terms have been liberalized, this increase in collection period may be appropriate. Arthur should also satisfy himself that these computations do, in fact, represent the year's activity. An accounts receivable aging schedule can indicate whether the longer collection period is due to a major delinquent customer or is representative of RCT's annual activity.Assuming Arthur is satisfied that RCT's credit terms have not changed and that annual activity is fairly represented, he should include more extensive audit procedures for sales and accounts receivable. The indicated trend may be due to understated sales or overstated accounts receivable. Arthur should carefully review the year-end cutoff for sales to verify that sales are not understated. He should also satisfy himself that there are no unrecorded sales.

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Arthur should verify that the accounts receivable are fairly stated at year-end. He should check that lapping has not occurred. Furthermore, he may wish to expand his normal confirmations to cover a larger proportion of the receivables. In addition, Arthur should satisfy himself that the accounts receivable balance includes only bona fide trade receivables.The changed ratio does not automatically imply that an account is misstated. It merely highlights an area for further inquiry. It is possible that the changed ratio is perfectly valid and that the related accounts are fairly stated. If this is so, the auditor should satisfy himself as to the cause of the changed ratio. For example, RCT may have increased sales by being less "selective" of its customers. Furthermore, tighter economic conditions may have caused customers to pay their bills more slowly. By inquiry of sales managers, Arthur may find out if there has been a change in the sales mix of products with varying credit terms.

The increased current ratio was due to an increase in current assets greater than the increase in current liabilities. Increases in both current assets and current liabilities are warranted because activity has increased from 2006 to 2007, but the major increase in current liabilities has been income taxes. The income taxes each year are directly proportional to that year's income before federal income taxes; therefore, the amount of income taxes is logical, assuming that Arthur is satisfied that each year's income before taxes is fairly stated. The accounts payable, however, have declined. Arthur should satisfy himself that the accounts payable are fairly stated. He should consider the use of confirmation requests and check that the cutoff of payables was handled properly. He should carefully search for unrecorded payables. He should investigate substantial decreases in long-term liabilities and should ascertain that current maturities of long-term liabilities are properly reported in the balance sheet.A ratio that is inconsistent from one year to the next does not necessarily imply misstatements. The objective of ratio analysis is to point out areas where further investigation is warranted. The auditor must satisfy himself that the accounts are fairly stated and that the change is justified.

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Solutions to Discussion Cases

5-39 a. The current-year audit discovered that Forestcrest Woolen Mills had not completed any construction work on the water treatment facility that must be built to comply with the consent decree from the North Carolina EPA. Failure to complete this facility on time can result in fines and possible plant closure under the consent decree. This situation represents a material uncertainty that is likely to be remote at this point in time. However, the auditor should determine if the client will continue work on the facility and if it can be completed within the remaining three years. If the client provides some assurance that work will start on the facility and that construction can be completed on time, the auditor will likely issue a standard unqualified audit report. The completion information can be obtained from the company's president and its construction company. If the client will not provide assurance on the future work on the facility and/or the construction cannot be completed on time, the auditor will have to consider what the potential effects of failure to comply with the consent decree might be. At this point, it is probably too early to consider issuing a "going-concern" opinion on the company. The auditor might require that client to provide more detailed disclosure of the issue in the footnotes to the financial statements.

b. If these facts were noted at the end of the seventh year of the consent decree, the auditor would again need information on the possible timely completion of the facility. If the facility can be completed, the auditor would most likely issue a standard unqualified report. If, however, the facility cannot be completed on time and the penalties under the consent decree are significant enough to raise doubts about the company's continued existence, the auditor would likely issue a modified report with an explanatory paragraph for going concern.

5-40 1. Reported ticket revenue differs from the expectation by approximately 14 percent ((2,200,000 - 1,922,190)/ 1,922,190); this difference is material and should be investigated. One explanation for the larger than expected reported ticket revenue could be that the football team performed better than expected. In addition, perhaps the weather also was better than expected. Auditors can verify ticket sales, perhaps by comparing deposits of ticket revenue with reported attendance. The auditors also could check weather conditions on game days to ascertain whether favorable weather conditions are a plausible explanation for the higher attendance.

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Development of Auditor’s ExpectationFour regular games

24,000 Total attendancePrice per Total

Allocation Total Fans Less free Ticket Revenue0.7 16,800 16,300 12 195,6000.2 4,800 4,800 8 38,4000.1 2,400 2,400 5 12,000

24,000 246,000 x4

Four normal games 984,000

Bloomington University

(30% higher attendance, 20% higher ticket price)

31,200 Total attendancePrice per Total

Allocation Total Fans Less free Ticket Revenue0.7 21,840 21,340 14.40 307,2960.2 6,240 6,240 9.60 59,9040.1 3,120 3,120 6.00 18,720

31,200 385,920

Norwalk University (20% more fans, 75% box seats, 25% upper deck)

Normal game revenue: 246,000

Price per TotalExtra fans (total): 4,800 Ticket Revenue

Box 3,600 12 43,200Upper 1,200 5 6,000

295,200

Night game (10% higher ticket prices, 5% lower

attendance)

24,000 Base attendance ticketsLess:

Free seats Price per Totaland 5% Ticket Revenue

0.7 16,800 15,485 13.20 204,4020.2 4,800 4,560 8.80 40,1280.1 2,400 2,280 5.50 12,540

24,000 22,325 257,070

Total estimated revenue for the year

$1,922,190

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Reported ticket revenue differs from the expectation by approximately 14 percent ((2,200,000 – 1,921,860)/1,921,860); this difference is material and should be investigated. One explanation for the larger than expected reported ticket revenue could be that the football team performed better than expected. In addition, perhaps the weather also was better than expected. Auditors can verify ticket sales, perhaps by comparing deposits of ticket revenue with reported attendance. The auditors also could check weather conditions on game days to ascertain whether favorable weather conditions are a plausible explanation for the higher attendance.

In a problem such as this, analytical procedures will be most effective when accurate expectations can be developed. From this information provided in this problem, it appears that the auditor’s knowledge of Western’s ticket sales is sufficient to allow them to develop a reasonable expectation.

Solutions to Internet Assignments

5-41 The Institute of Internal Auditors (IIA) home page (www.theiia.org) contains detailed information about various activities of the IIA. This includes information on the profession, certification, conferences, products, etc. A search of the Web site identified information about independence and objectivity.

5-42 A search of the Internet identified a number of potential sources for information on the mail order industry:

The National Mail Order Association (www.nmoa.com) is one site where small to medium-sized organizations can go to get information on education, ideas, resources, and contacts.

The National Retail Federation (www.nrf.com) maintains historical retail statistics. The International Society for Strategic Marketing (www.issm.org) maintains a site that

contains economics statistics from the Census Bureau on various SIC codes related to the mail order industry.

Lastly, a number of the major public accounting firms have industry specialization in retail. The sites of the firms contain information on the retail industry.

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http://www.issm.org/

http://www.nrf.com/

http://www.nmoa.com/

http://www.theiia.org/

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