• 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

1. Business Risk Assessment
2. 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
3. Risk of Material Misstatement
1. Significant Account
2. Tests of controls: a. Tests of design; b. Tests of operating effectiveness

3. Substantive Tests
4. 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.