Required:

Compare and contrast the scopes of the audits of the State Accounting Office in Exercise E-1 and the Region II office of Commercial Enterprises, Inc. in Exercise E-2.

Exercise E-1

The director of internal auditing for a state government drove into his parking spot in the basement of the capitol building. As he opened his door to get out, he heard one of his auditors yell from across the parking lot that the director of public safety had been trying to contact him for the last half-hour, and it was an emergency. When he arrived at his office a few minutes later, the director of auditing called to find out what the emergency was. It seems that the payroll checks for the department had been issued during the past two months with gross errors in them, often amounting to several thousands of dollars. The director of public safety had called the State Accounting Office to inquire why the errors had occurred and when the checks could be corrected. Personnel at the State Accounting Office said that a new computerized payroll system had been installed, and they were still working out the bugs, but they would correct any checks made out for the wrong amounts within a week. This promise had been made each of the last two months, and still the checks that were in error had not been corrected. The employees in public safety were complaining loudly. After calling the State Accounting Office and several other state offices to check for similar mistakes, the director of auditing decided an immediate audit was necessary, but all of his auditors were already on assignment, except for one threeman team which had been assigned to begin an audit of the State Tax Commission the following day.

Exercise E-2,

Gene Roberts, audit manager for Commercial Enterprises, Inc., is selecting a three-man team to audit the Region II headquarters office of the firm. The office is responsible for marketing the company’s full line of products, including electrical appliances, powered lawn care products, snowblowers, and ski accessories. The Region II headquarters conducts market tests of new products as they are introduced to its clients. The office sells its products wholesale to retail outlets and takes orders from three months to a year in advance of delivery. The Region II office also assists its clients in cooperative advertising promotions, and sends a corps of 50 salespeople throughout the region to call upon clients and to stage special demonstrations at fairs and other special public occasions. An assistant controller works in the office to keep all of the accounting records and sends them via computer to the company’s headquarters. The office is responsible only for sales and is managed as a revenue center. The regional offices of the company do not maintain inventories; the products are shipped to the clients from a main warehouse in Chicago. The audit will examine the full scope of activities that are conducted through the regional office. Roberts is selecting a supervisor, a senior staff auditor, and a junior staff auditor. The following auditors are available to go on the audit:

Supervisors:

Kenn Griffith has been with Commercial Enterprises for seven years. He is 36 years old and has a bachelor of science degree in industrial engineering. He spent four years in the Navy immediately after completing his degree and is a specialist in computer auditing.

Mark Church is a 28-year-old MBA who has worked with the company for four years.
His undergraduate degree was in accounting, and he pursued general business studies in his MBA work. He is highly regarded for his understanding of the interrelationships among the company’s different elements.
Senior Staff Auditors:
Deborah Vandenbergh is a CPA who worked in auditing for two years with a public accounting firm before joining Commercial. She has been with the firm less than a year and is still learning how the different operations are organized, although she has developed a good reputation for her knowledge of financial internal control.
Billy Coe is a management trainee who has worked in the auditing department for a year.
He previously spent six months in sales and another 18 months in financial management.
He is scheduled to transfer out of the auditing department in another three months to assume a position as an assistant sales manager of Commercial’s Eastern Regional office.
Junior Staff Auditors:
Claude Mann and Judy Torres are both recent graduates of State University. Judy was an accounting major who concentrated her elective courses in human resource management.
Claude majored in communications and is now studying for the Graduate Management Aptitude Test. He plans to begin an evening MBA program in the spring.
Required:
If you were Gene Roberts, which of the available auditors would you choose for the three-man team? Explain your answer.