Question

6-11 LO2 Assume that an automotive company discloses the following risk factors, listed as (1) through (7), that might affect the financial statements. 1. Continued decline in market share, and a market shift (or an increase in or acceleration of market shift) away from sales of trucks or sport utility vehicles, or from sales of other more profitable vehi- cles in the U.S. 2. Continued or increased price competition resulting from industry overcapacity, currency fluctuations, or other factors. 3. Lower than anticipated market acceptance of new or existing products. 4. Substantial pension and postretirement health care and life insurance liabilities impairing our liquidity or financial condition. 5. Worse than assumed economic and demographic experience for our postretirement benefit plans (e.g., discount rates, investment returns, and health care cost trends). 6. The discovery of defects in vehicles resulting in delays in new model launches, recall campaigns, or increased warranty costs. 7. Unusual or significant litigation or governmental investigations aris- ing 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 balance identified, indicate how the risk will affect the audit evidence you will gather. Identify the specific assertion of pri- mary concern to the auditor.

          6-11 LO2 Assume that an automotive company discloses the following
risk factors, listed as (1) through (7), that might affect the financial
statements.
1. Continued decline in market share, and a market shift (or an
increase in or acceleration of market shift) away from sales of trucks
or sport utility vehicles, or from sales of other more profitable vehi-
cles in the U.S.
2. Continued or increased price competition resulting from industry
overcapacity, currency fluctuations, or other factors.
3. Lower than anticipated market acceptance of new or existing products.
4. Substantial pension and postretirement health care and life insurance
liabilities impairing our liquidity or financial condition.
5. Worse than assumed economic and demographic experience for our
postretirement benefit plans (e.g., discount rates, investment returns,
and health care cost trends).
6. The discovery of defects in vehicles resulting in delays in new model
launches, recall campaigns, or increased warranty costs.
7. Unusual or significant litigation or governmental investigations aris-
ing 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 balance identified, indicate how the risk will affect
the audit evidence you will gather. Identify the specific assertion of pri-
mary concern to the auditor.

6-11 LO2 Assume that an automotive company discloses the following
risk factors, listed as (1) through (7), that might affect the financial
statements.
1. Continued decline in market share, and a market shift (or an
increase in or acceleration of market shift) away from sales of trucks
or sport utility vehicles, or from sales of other more profitable vehi-
cles in the U.S.
2. Continued or increased price competition resulting from industry
overcapacity, currency fluctuations, or other factors.
3. Lower than anticipated market acceptance of new or existing products.
4. Substantial pension and postretirement health care and life insurance
liabilities impairing our liquidity or financial condition.
5. Worse than assumed economic and demographic experience for our
postretirement benefit plans (e.g., discount rates, investment returns,
and health care cost trends).
6. The discovery of defects in vehicles resulting in delays in new model
launches, recall campaigns, or increased warranty costs.
7. Unusual or significant litigation or governmental investigations aris-
ing 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 balance identified, indicate how the risk will affect
the audit evidence you will gather. Identify the specific assertion of pri-
mary concern to the auditor.

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