The management discussion and analysis for Tesla Inc. provides a lot
information regarding various risks they face with financial reporting.
Some of these risks related to accounts receivable and accounts
payable include:
a
• Capital expenditures that are difficult to project beyond the
short-term (understatement of accounts payable)
• Large investment into Bitcoin (price has fluctuated significantly
could understate or overstate revenue)
• Estimates and assumptions that are based on historical
experience and other assumptions they believe to be
reasonable (could understate AR/AP/or Revenue reguarding
the value of assets)
• Resale and buyback programs they offer on their vehicles
(understate revenue significantly if they underestimate how
many people will utilize the buyback program)
• Warranties related to various parts and possibly recalls
(understate AP if an unexpected recall takes place that costs
much more than anticipated)
Tesla has opened up new factories and is increasing their production,
as well as developing new vehicles. Having facilities all over the world
makes it important for an auditor to carefully review many different
documents to make sure their sales and shipments are accurately
recorded and that all of GAAP and IFRS standards are being met.
Some specific tests an auditor may design based on these risks
include:
• Review the process of recording transactions
• Trace details of shipping documents to related sales invoices
• Management review of controls
• Review year-end cutoff of sales
• Reconcile liabilities with monthly statements from creditors
References
Inline XBRL Viewer (sec.gov)
Whittington, R., & Pany, K. (2021, January 11).
Principles of Auditing
& Other Assurance Services
. McGraw Hill. Retrieved July 10, 2022,
from https://www.mheducation.com/highered/product/principles-
auditing-other-assurance-services-whittington-
pany/M9781260247954.html
