Your client, Byrd and Byrd, Inc., a regional trucking company, has prepared a financial forecast for the
Question:
Your client, Byrd and Byrd, Inc., a regional trucking company, has prepared a financial forecast for the coming year and has asked you to examine it and issue a report to accompany it. Management's assumptions, on which the forecast is based, are as follows.
1. Inflation will average 2 percent next year.
2. There will be no change in accounting principles or tax rates.
3. The company will acquire a new route between Tulsa and Kansas City.
4. Motor fuel will be in adequate supply, although at a slightly higher cost.
5. There will be no net expansion of the company's truck fleet; a few new trucks will be purchased to replace older models.
6. Real GNP growth will moderate in the coming year to a real rate of two percent.
7. Industrywide, truck shipment miles will increase 5 percent.
8. The union agreement with the Teamsters will be renegotiated without a strike and for no pay increase.
9. Interest rates will average 10 percent next year.
Evaluate these assumptions for reasonableness and consistency. In addition, state the procedures you would use to determine whether the assumptions are adequately supported.
Step by Step Answer:
Auditing An Assertions Approach
ISBN: 9780471134213
7th Edition
Authors: G. William Glezen, Donald H. Taylor