Fred Owens is the loan officer of the Commonwealth Bank in Newcastle. The bank has a loan of $260 000 outstanding to Regional Delivery Service Pty Ltd, a company specialising in delivering products of all types on behalf of smaller companies. The bank's collateral on the loan consists of 35 small delivery trucks with an average original cost of $17 000.

Owens is concerned about the collectability 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 Owens. She is engaged because she spends most of her time auditing used motor vehicle and truck dealerships and has extensive specialised knowledge about used trucks. Owens requests that Virms issue a report stating the following:

1. Which of the 35 trucks are parked in Regional's parking lot on the night of 30 June 20X1

2. Whether all of the trucks are owned by Regional Delivery Service

3. The condition of each truck, using the guidelines of poor, good and excellent

4. 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, and also using the poor, good and excellent condition guidelines.

REQUIRED

a. For each of the following parts of the definition of auditing, state which part of the preceding narrative fits the definition:

(1) Information

(2) Established criteria

(3) Accumulating and evaluating evidence

(4) Competent, independent person

(5) Reporting results.

b. Identify the greatest difficulties Virms is likely to have doing this audit.