Assume that an automotive company discloses the following risk factors, listed as (1) through (7), that might affect the specific assertion of primary concern to the financial statements. Continued decline in market share, and a market shift (or an increase in acceleration of market shift) away from sales of trucks or sport utility vehicles, or from sales of other more profitable vehicles in the U.S. Continued or increased price competition resulting from industry overcapacity, currency fluctuations, or other factors. Lower than anticipated market acceptance of new or existing products. Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition. Worse than assumed economic and demographic experience for our postretirement benefit plans (e.g., discount rates, investment returns, and health care cost trends). The discovery of defects in vehicles resulting in delays in a new model launches, recall campaigns, or increased warranty costs. Unusual or significant litigation or governmental investigations arising out of alleged defects in our products or otherwise. For each risk factor, identify a related account balance that the risk might affect. For each account identified, indicate how the risk will affect the audit evidence you will gather. Identify the specific assertion of primary concern to the auditor.

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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6-11. Assume that an automotive company discloses the following risk factors, listed as (1) through (7), that might affect the specific assertion of primary concern to the financial statements.

Continued decline in market share, and a market shift (or an increase in acceleration of market shift) away from sales of trucks or sport utility vehicles, or from sales of other more profitable vehicles in the U.S.
Continued or increased price competition resulting from industry overcapacity, currency fluctuations, or other factors.
Lower than anticipated market acceptance of new or existing products.
Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition.
Worse than assumed economic and demographic experience for our postretirement benefit plans (e.g., discount rates, investment returns, and health care cost trends).
The discovery of defects in vehicles resulting in delays in a new model launches, recall campaigns, or increased warranty costs.
Unusual or significant litigation or governmental investigations arising out of alleged defects in our products or otherwise.

For each risk factor, identify a related account balance that the risk might affect. For each account identified, indicate how the risk will affect the audit evidence you will gather. Identify the specific assertion of primary concern to the auditor.

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