David Davidson, the partner in charge of the Bombardier Aerospace audit, was reviewing the work his team had completed.

Bombardier is a Canadian company. They used to be involved in recreational equipment such as Ski-Doo snowmobiles and Sea-Doo watercraft. Their Aerospace division, however, is probably their best known operating segment and is known as a leading manufacturer of commuter jets containing 50-100 seats.

Bombardiers operations were by far the largest of the aerospace companies in Montreal and several of the new programs were very ambitious and very risky. It seemed to David that every review he performed had material misstatement possibilities.

David was thinking that an audit of this magnitude was challenging his abilities in evaluating what was sufficient and appropriate audit evidence.

When David started the audit of the current years operations, he was surprised with the events that took place in 2015 at the Bourget and Farnborough air shows. The anticipation for Bombardiers new CSeries aircraft turned out to be less than positive as other manufacturers seemed to pile up the orders. Airbus executives had also been claiming for months that their companys introduction of a new engine option (NEO) for the A320 narrowbody voided the business case for the CSeries.

Although Bombardier has been able to get commitments up to 100 aircraft, the company is only one-third of the way to its goal of 300 orders for the CSeries scheduled service entry in late 2017. This also still leaves Bombardier 350 aircraft short of the sales required for the project to break even.

As Bombardier attempts to expand its aircraft product line into medium-sized aircraft (100-149 seats), it is entering a space that is getting very close to the market segment dominated by industry giants, Boeing and Airbus. While those companies tend to focus on even larger aircraft, they may want to protect themselves by defending against Bombardier in the medium-sized aircraft segment because Bombardier could later expand into the lucrative large-aircraft segment. Bombardiers $3.4-billion bet on the market for narrow-bodied aircraft faces a potential threat: a price war instigated by Boeing Co. and Airbus SAS.

David Davidson had an uneasy feeling about the viability of the Aerospace sector of the companys operations.

Required:

a) Describe the factors that David Davidson and his firm will have to consider in evaluating the sufficiency and appropriateness of audit evidence at Bombardier Aerospace.

b) What factors are relevant when management assesses the going concern issue at Bombardier?