Introduction:This week's discussion is related to auditing a large organization's long-term...

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Introduction:This week's discussion is related to auditing a large organization's long-term liability stemming from its defined pension plan. Pension amounts are accounting estimates, thusAS 2501(Links to an external site.), "Auditing Accounting Estimates" of the PCAOB's auditing standards can be used as a general framework for developing appropriate audit procedures for those items. Ch13 discusses auditors' responsibility with the client's pension obligations as well as other long-term liabilities. Read the case on General Motor Company and discuss the following matters based on the given information in the case:Discussion Questions1. Do you believe that Deloitte behaved properly by accepting GM's decision to apply a 6.75% discount rate to its pension liabilities?2. Did the choice of the 6.75% discount rate in 2002 have a material impact on GM's financial statements?

Khushboo · Accepted Answer

Solution 1:
I believe that Deloitte did not behaved properly and in the best interest of the shareholder of the entity by accepting the decision to apply 6.75% discount rate to its pension liabilities. Further Deloitte was aware of the sensitive condition of the GM in terms of liquidity and also realized the effect on the decision whether the entity should continue as going concern. Thus the auditor should follow each aspect of the report with the adequate level of professional skepticism while evaluating the correctness and effectiveness of the earning forecast made by the management (Leonard, Kimberlee 2019). The auditor firm Deloitte is aware about the way discount rate will have impact on the accounts, financial statement and liquidity of the entity and hence it cannot be believed that the Deloitte was fooled by accepting this discount rate on its pension liabilities as the firm was aware about the situation of the entity. In addition to this the base for the calculation of rate of 6.

Introduction: This week's discussion is related to auditing a large organization's long-term liability stemming from its defined pension plan. Pension amounts are accounting estimates, thusAS...

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