Reference no: EM133096031

Question - You are the current auditor of Tesla, an electric vehicle and clean energy company that is based in the USA, with a recent research centre opened in the Northern Territory, Australia. Tesla designs and manufactures electric cars and battery compartments, and in 2020 launched the Tesla's "Model 3" and "Model Y" electric vehicles into the Australian market, with the longest battery range among electric cars. As a result, there is a current backlog of customer orders for these cars in Australia, whereas the demand in the USA is declining due to consumer hesitancy. Tesla has been able to achieve longer battery ranges by acquiring "Maxwell Technologies" for $200million in 2018, who together have worked on a unique battery design and technology to increase the battery range and reduce the price of Tesla cars. However, Tesla has been criticised with media reports in December 2020 suggesting they are designing cheaper batteries by removing some safety features. The Australian Competition and Consumer Commission (ACCC) is investigating these claims and whether Tesla has breached Australian Consumer Law in terms of product safety. This ACCC investigation is in addition to a current lawsuit against Tesla, where an electronic car owner from Darwin is suing Tesla to compensate for damages caused after the battery compartment of his "Model 3" exploded in 2020, resulting in third degree burns to 70% of his body.

Required - Relying on the information provided above only (i.e. do not create your own facts), answer the following questions in respect to Section A Case Facts in the below response template:

a) Identify the key assertion at risk.

b) Explain why this represents a risk to the auditor (i.e. RMM) and the key account affected.

c) Outline a practical, appropriate way an Auditor would gather evidence to respond to the RMM (can be either a Substantive Test or Test of Control that addresses the risk.