"Cоmply оr explаin" system оf governаnce is used in
NOTE: The requirements аre in mаrооn fоnt to ensure you аddress each one. You are performing the audit of the warranty reserve for a new electric car manufacturing company. Recently, the company has faced issues with batteries exploding when cars are driven at excessive speeds. Given the financial impact of warranty claims, the company has implemented controls to estimate and review its warranty reserve. As part of your audit, you are testing the following control: Each quarter, Geraldo, the CFO, reviews the warranty reserve prepared by the controller for reasonableness. His review includes: Verifying the calculations used to determine the reserve. Speaking with employees in the warranty and sales departments to understand anticipated issues affecting warranty expenses. Following up with the controller on any outstanding concerns from his review. Required: 1. When auditing this control, what procedures would you perform, and what evidence would you examine to test its (a) design effectiveness and (b) operating effectiveness? (5 points) 2. What recommendations could you provide to the company to improve the documentation of this control? (5 points)