Question
Provide an original and substantive response to the questions posed in your Journal in a minimum of 200 words Think about other companies, such as
Provide an original and substantive response to the questions posed in your Journal in a minimum of 200 words
Think about other companies, such as a luggage manufacturer. Suppose you purchased a luggage set 5 years ago for $300. The luggage came with a lifetime warranty, serviced only by the manufacturer and not the retailer. You have noticed a rip in the fabric, but you do not want to go through the trouble of mailing the suitcase back for repair. Of course the company would honor your claim if you chose to send in your suitcase, but did they set aside proper liability reserves?
If you were auditing the luggage company, how would you gain confidence in managements accounting for warranty claims?
Would you assume the company adequately accounts for the number of people who might make claims?
What information would you use to gain confidence in their valuation?
What are some other warranty situations where it is more of a guessing game as to how many claims could be filed in any given year?
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