May 04, 2024 AUDIT FILE MEMORANDUM FROM: SUBJECT: Narrative for the planning section of the audit working papers for the 2024 fiscal year for Rivian Automotive, Inc. FACTS: The.. The name of the Company is Rivian Automotive Inc. (the “Company” or “Rivian”). Rivian exists to create products and services that help our planet transition to carbon neutral energy and transportation. Rivian designs, develops, and manufactures category-defining electric vehicles and accessories and sells them directly to customers in the consumer and commercial markets. The Company has a 12/31 year-end. The Company became a publicly traded Company in November 2021 through an initial public offering of 176 million shares of Class A common stock at an offering …show more content…
Rivian operates within a rapidly evolving and highly competitive industry. The annual report for operating income (loss), shows a trend of losses, in 2021 (-4220), 2022 (-6752) and 2023 (-5432). Although the loss decreased from 2022 to 2023, the constant operating losses signify a risk for investors, consumers, and suppliers. The intricacies of its operations, encompassing the design, development, and manufacturing of electric vehicles, introduce inherent risks concerning financial reporting and internal controls. As a publicly traded entity, Rivian must adhere to various regulatory requirements, including those outlined in the Sarbanes-Oxley Act (SOX) concerning financial reporting. It is imperative to reevaluate any weaknesses or deficiencies identified in Rivian's internal controls during the 2023 audit to ensure effective remediation. Ineffective internal controls heighten the risk of material misstatement in the financial statements. According to the Federal Register, “Rivian determined that certain MY 2022 Rivian EDV motor vehicles do not fully comply with paragraph S4.5.1(b)(5)(i) of FMVSS No. 208, Occupant Crash Protection (49 CFR 571.208).” This type of regulation non-compliance would constrain an auditor, to evaluate the potential financial …show more content…
An example of fraud for Rivian, “A federal judge said Rivian Automotive must face a lawsuit claiming it defrauded shareholders during and after its blockbuster 2021 initial public offering by concealing that it had underpriced its electric vehicles, leading to unpopular price hikes.” (Stempel). In an instance of fraud occurring at Rivian that displays weaknesses in internal controls, the company should have detected these mistakes. Although the company has spoken about the issue and stated that they are actively trying to improve their internal control system, the legal implications constitute great damage to our auditors. Given Rivian's history of losses, the company and its top management may be under significant pressure from investors or current stockholders. This pressure, combined with personal financial obligations, could provide a motive for management to misappropriate the company’s assets. As a result, there is an increased risk that the company may continue to manipulate and misclassify financial information to conceal substantial