ACG 4651

Assignment 1

1. The three desirable qualities of house inspectors are competent, objective, and honest. These
characteristics are related to auditors. For Competent, auditors required training, expertise, and
experience to evaluate Financial Statements. Auditors also need to choose an appropriate audit report
in order to issue and evaluate results. Auditors sometimes uses their knowledge to apply in the nature,
timing, and extent of evidence of audit procedures. Next, for objective, auditors must have no reason to
side with seller, that is, they should be independent of the company they are auditing. Therefore, the
suspect of beneficiary can be avoided since they do not have a relationships to the company. Last, for
honest, auditors have to conduct themselves with integrity and share all of their findings to their client.
Auditors should report to the client if they find any material misstatements in order to provide an
unqualified report.

2. Corporate governance is a system that consists of all people, processes, and activities in place to help
ensure proper stewardship over an entity's assets. A good corporate governance ensures that those
managing an entity properly utilize their time, talents, and the entity's resources in the best interest of
absentee owner, and that they faithfully report the economic condition and performance of the
enterprise. The body primarily responsible for management oversight in the United States corporations
is the board of directors. The audit committee, consisting the members of the board, oversees the
internal and external auditing work done for the organization.
3. Utilitarianism recognizes that decision making involves trade-offs between the benefits and burdens
of alternative actions and focuses on consequences and on individuals affected. Right-based approach
assumes that individuals have certain rights and other individuals have a duty to respect those right
when making decisions. Justice-based approach is concerned with issues such as equity, fairness, and
impartiality.
4. The three types of audits are compliance audits, operational audits, and forensic audits. A compliance
audit determines the extent to which rules, policies, law, covenants, or government regulations are
followed by the entity being audited. An operational audit involves a systematic review of part or all of
an organization's activities to evaluate if resources are being used effectively and efficiently. The
purpose of an operational audit is to assess performance, identify areas for improvement, and develop
recommendations. A forensic audit is to detect or deter fraudulent activities. Some examples of forensic
audit is needed is to investigate business or employee fraud, criminal investigations, shareholder and
partnership disputes.
5. The plaintiff needs to prove 1) a loss was suffered by investing in the registered security, and 2) the
audited financial statements contained a material omission or misstatement. The auditor is presumed to
have been negligent unless they can prove otherwise. Auditors can defense themselves using "due
diligence." The auditors must have made a reasonable investigation of the facts supporting or
contradicting the information included in the registration statement.