Question

I would like you to let me know what you would do with the following case. You are the lead auditor for the accounting firm that audits Boeing that has had 2 recent crashes of its new Boeing 737 max jet. What would you do ?

Answer 1

Solution:

As an auditor, we need to investigate the below items in this case.

1. Has the company signed off any compensation for the crash while selling of boing 737. If yes, this needs to be provided for in financials.
2. We also need to evaluate the commercial operation of boing 737 considering the crash and if that is declining, we need to charge all production cost incurred in the current financials.
3. We need to consider and see the contribution of boing 737 in the P&L of the entity. If this is considerably a major one, we also need to evaluate the going concern of the entity
4. This might also result into cancellation of further order and therefore we need to see the work in progress cost and to evaluate if this needs to be impaired.
5. Impairment test of any patent for boing 737 needs to be done
6. Based on technical report of the crash, we need to evaluate if there are any substantial changes to be done in existing inventory and if yes, the estimated cost to be provided.