- Based on the examination of Tesla’s financial statements and notes you will perform a risk assessment and identify a significant (qualitative and quantitative characteristics) account (e.g. Goodwill/Allowances/Valuation for DTA/etc.). For the selected account determine which assertions are relevant (completeness, existence, accuracy, valuation, obligations and rights, presentation) and provide the following:
- Controls tested for test of design and conclusion (include sample sizes any how they were determined)
- Controls tested for operating effectiveness and conclusion (include sample sizes any how they were determined)
- Substantive tests performed and conclusion (include sample sizes any how they were determined)
- Final audit opinion over controls
- Final audit opinion over financial statements
Note1: Only one account needs to be selected but if there is another account that goes hand-in-hand you should be consistent (e.g. Goodwill + Impairment)
Note 2: If the substantive tests showed any errors (you can be creative and give them deficiencies on controls or a qualified opinion as long as you detail why).
We choose to audit Tesla’s warranty account. Here is the outline we made:
Assignment outline
- Business Risk Assessment
- Auditor’s documented understanding of the business (industry, regulatory, nature, accounting choices, tone at the top, etc.) – Tesla has exponential growth in sales and production
- Risk of Material Misstatement
- Significant Account
- Tests of controls: a. Tests of design; b. Tests of operating effectiveness
- Substantive Tests
- Final Auditor’s Opinion: a. Opinion on
financial statement; b. Opinion on internal
controls; c. Key
recommendations for client
I am doing Section 2 (Tests of controls: a. Tests of design; b. Tests of operating effectiveness) and Key recommendations for client.
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