Question

1. Apple announced that they would shut all their stores worldwide, except China for several weeks and that closure may be extended further. From an audit risk perspective:
   1. List a key income statement account that this is likely to impact

2. List a key balance sheet account that it will impact

3. For the balance sheet impact, list the assertion that is impacted the most

Answer 1

precaution for Coronavirus infection.

(a) From Income statement point of view, Apple can see a dip in the revenue due to this unexpected situation around the world.

(b) From Balance sheet point of view, their Retained Earnings figure will get affected due to warnings of a revenue dip in this financial year. At the same time, the inventory will increase due to less sale.

(c) The balance sheet will be affected due to closure of retail stores around the world. Apart from the increase in Inventory and decrease in Retained earnings, the Cash account will also take a hit due to decrease in sales and due to payment of existing liabilities. While Apple sits on a pile of cash balance, so repayment of obligations will not be a problem. It will, however, certainly make a dent in cash balance.