In performing tests of the acquisition and payment cycle for Orlando Manufacturing Company, the staff assistant did a careful and complete job. Because internal controls were evaluated as excellent before tests of controls and substantive tests of transactions were performed, and were determined to be operating effectively on the basis of the lack of exceptions in the tests of controls and substantive tests of transactions, the decision was made to reduce the tests of expense account analysis significantly. The in-charge auditor decided to reduce but not eliminate the acquisition-related expense account analysis for repair expense, legal and other professional expense, miscellaneous expense and utilities expense (water rates, light and power) on the grounds that these should always be verified more extensively than normal accounts. The decision was also made to eliminate any account analysis for the acquisition of raw materials, depreciation expense, supplies expense, insurance expense or the current-period additions to fixed assets.

REQUIRED

a. List considerations in the audit besides the quality of internal controls that should affect the auditor's decision as to which accounts to analyse.

b. Assuming that no significant problems were identified on the basis of the other considerations in (a), evaluate the auditor's decision to reduce but not eliminate expense account analysis for each account involved. Justify your conclusions.

c. Assuming that no significant problems were identified on the basis of the other considerations in (a), evaluate the auditor's decision to eliminate expense account analysis for each account involved. Justify your conclusions.