Scenario One: (500 Words) You are an audit senior in an accounting firm and you asked the audit partner about the 'audit expectation gap'. The audit partner provided his opinion on the issue as follows: There is a so called 'audit expectation gap', and it is associated with unreasonable expectations of users. They want all fraud found, and a guarantee that the company will continue forever! This is quite unreasonable and not what the audit is designed to do! Perhaps we could do more on these issues, but it would be more work, cost more, and I doubt whether the companies would be prepared to pay anyway. Required Discuss the views of the audit partner. Scenario Two: (500 Words) Eric, a young CPA and one of the audit team members for ABC Pty Ltd, has developed very good insights into the company's systems in the last 12 months and was asked by his partner, John, to draft a report on the reliability of internal control at ABC for review. The report is to be used as a part of a due diligence assurance engagement for ABC's prospectus. ABC wants to be listed on Australian Securities Exchange by coming June. In carrying out the review, Eric finds a number of matters that concern him. He notices that the controls over inventory requisitions are very poor, leading to numerous complaints from customers about delays and wrong deliveries, and cancellations. Moreover, the inventory records do not show the history or the values of the inventory, so that estimates were used to arrive at the year-end inventory. He also noticed the poor standard of appliances, with manufacturers' warranties long expired. Eric completes his report, with details of the poor internal controls for his partner's review. However, his partner replaces his report with a very brief summary, and a conclusion that the internal control systems are sound and reliable. Eric makes an appointment to see John, but is worried as to how he should approach him about ABC's issues. Required: Discuss the professional and ethical issues faced by Eric and provide an analysis which can help him deal with the matter with John. Scenario Three: (2000 Words) Introduction Thomas Smith, a senior accountant with Dalen & Jay, CPAs, has recently been assigned as in charge auditor of Mathra Tool, Inc. (MTI), a long time audit client of his firm. MTI is owned by George Mathra, an experienced machinist. George established the business over 20 years ago, and it has grown into a $10 million-a-year business, with an excellent reputation for high quality machined parts. MTI has clients in the automobile sector and the health care sector and has recently begun producing parts for environmentally friendly products, such as recycling containers, due to the business's versatility in dealing with a variety of metals as well as plastics.