Consumers Union is a nonprofit organization that provides information and counsel on consumer goods and services. A major part of its function is the testing of different brands of consumer products that are purchased on the open market and then the reporting of the results of the tests in Consumer Reports, a monthly publication. Examples of the types of products it tests are mid-sized automobiles, residential dehumidifiers, flat-screen TVs, and blue jeans.

Compare the three ways users of financial statements can reduce information risk with those available to a buyer of an automobile.

Select the ways to reduce information risk for a buyer of an automobile and the application to the buyer.

Ways to reduce information risk Application to the buyer of an automobile:

User verifies information

User shares information risk with management

Accounting staff should certify the accounting data

(Options for Application of buyer of an automobile)

a.		That can be obtained by analyzing the manufacturer audited financial statements.
b.		The manufacturer of a product has a responsibility to meet its warranties and to provide a reasonable product. The buyer of an automobile can return the automobile for correction of defects. In some cases a refund may be obtained.
c.		That can be obtained by driving different automobiles, examining the specifications of the automobiles, talking to other users and doing research in various magazines.
d.		That can be obtained by obtaining financing at a low interest rate.
e.		That can be obtained by reviewing the manufacturer certification on the application of GAAP.
f.		This is similar to an audit in the sense that independent information is provided by an independent party. The information provided by Consumer Reports is comparable to that provided by a CPA firm that audited financial statements.