Reference no: EM13886883
Assume that an automotive company discloses the following risk factors (labeled 1. through 7. below) 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 vehicles in the United States.
2. Continued or increased price competition resulting from indus- try 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 insur- ance 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 arising out of alleged defects in our products or otherwise.
a. For each risk factor, identify a related account balance that might be affected by the risk.
b. For each account balance identified, indicate how the risk will affect the audit evidence that will be gathered. Include what specific assertion is being addressed.
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