Ford case study
Ford Motor Company and Toyota Case Work
Ch. 3
Step 1. Structure the audit problem: In the first step, we consider the relevant parties involved; identify the alternatives, risks and uncertainties; how to evaluate them and how to structure the problem. The parties are the Ford Motor Company, PricewaterhouseCoopers LLP and lastly the Audit Committee. The problem that may arise is that Ford Motor company has PricewaterhouseCoopers audit and prepare essentially all of the company’s financials for their internal controls to the company’s taxes rather than having different accounting firms participate in any financial area. This could be a conflict of interest if there are no checks from an outside party other than the two companies.
Step 2. Assess consequences of decision: In the second step, the auditor assesses the consequences of the potential alternatives. If the company hires multiple firms to assist with audits and tax preparation the company might have to pay more for essentially the same services since one company could handle the job. There could be several break downs in communications if the company has to relay information to multiple companies working on the same areas. Also, there might be too much of a secular work environment rather than a collaboration if there are multiple firms working on the financials. The other issue of having just one company work on the financials is that the Ford company could be paying for good results from PricewaterhouseCoopers and there wouldn’t be an outside source to check.
Step 3. Assess risks and uncertainties of the audit problem: In the third step, the auditor assesses the risks and uncertainties in the situation. Which involves anything relating to the risks the audit client faces, the quality of evidence the auditor gathers, and lastly the sufficiency of audit evidence gathered. The evidence of the for mentioned issues is that Ford has paid PricewaterhouseCoopers over $50 million two years in a
Ch. 3
Step 1. Structure the audit problem: In the first step, we consider the relevant parties involved; identify the alternatives, risks and uncertainties; how to evaluate them and how to structure the problem. The parties are the Ford Motor Company, PricewaterhouseCoopers LLP and lastly the Audit Committee. The problem that may arise is that Ford Motor company has PricewaterhouseCoopers audit and prepare essentially all of the company’s financials for their internal controls to the company’s taxes rather than having different accounting firms participate in any financial area. This could be a conflict of interest if there are no checks from an outside party other than the two companies.
Step 2. Assess consequences of decision: In the second step, the auditor assesses the consequences of the potential alternatives. If the company hires multiple firms to assist with audits and tax preparation the company might have to pay more for essentially the same services since one company could handle the job. There could be several break downs in communications if the company has to relay information to multiple companies working on the same areas. Also, there might be too much of a secular work environment rather than a collaboration if there are multiple firms working on the financials. The other issue of having just one company work on the financials is that the Ford company could be paying for good results from PricewaterhouseCoopers and there wouldn’t be an outside source to check.
Step 3. Assess risks and uncertainties of the audit problem: In the third step, the auditor assesses the risks and uncertainties in the situation. Which involves anything relating to the risks the audit client faces, the quality of evidence the auditor gathers, and lastly the sufficiency of audit evidence gathered. The evidence of the for mentioned issues is that Ford has paid PricewaterhouseCoopers over $50 million two years in a