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If the products sold are consistent with prior years, Tanner CPA should approach the audit of Lucas Manufacturing's accrued warranty by first understanding the client's
If the products sold are consistent with prior years, Tanner CPA should approach the audit of Lucas Manufacturing's accrued warranty by first understanding the client's method for estimating the warranty liability. This includes understanding the historical trends in warranty claims and how they are applied to the current year's sales. The auditor should then test the reliability of these estimates by comparing them to actual warranty claims in the past. This can be done by examining a sample of past sales and the related warranty claims to see if the estimates were accurate. The auditor should also consider any changes in circumstances that could affect the accuracy of the estimates, such as changes in product quality or changes in the warranty terms
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