a. What are the key revenue cycle accounts for Ford? What accounts involve critical accounting estimates?
b. What does Ford say in Footnote 2 about its use of accounting estimates?
What risk do these estimates pose for the auditor?
Ford 10-K and Toyota Annual Report or 20F
c. Compare Ford and Toyota’s footnotes on finance receivables. What is the audit firm’s responsibility regarding the informativeness of the disclosures?
d. Ford lists a variety of risk factors associated with its business. Review those and identify which relate most to the revenue cycle. What evidence might the auditor gather to understand how those risks may affect the financial statement line items associated with the revenue cycle?
e. Read Ford’s Management Discussion and Analysis section titled “Key Economic Factors and Trends Affecting the Automotive Industry.” What are the main points that Ford management raises regarding its ability to generate revenue and profits in the near term? What do its statements imply about the risks associated with auditing Ford Motor Co.?