FAQ
Frequently asked questions
Accounting questions specific to the automotive sector – vehicle valuation, warranties, and dealer group structures.
What does an auditor check at a car dealership?▾
Key areas include: valuation of new and used vehicles on hand (NRV test), settlements with the importer or OEM (volume bonuses, payment terms), correct classification of demonstration and test vehicles, warranty reserves, and monitoring of overdue trade receivables from service customers. In dealerships with complex margin structures, the auditor examines the consistency of the accounting policy across each revenue stream: new cars, service, parts, and financial products.
How should demonstration and test vehicles be accounted for?▾
Demonstration vehicles may be classified as inventory or fixed assets depending on the expected period of use (typically over one year = fixed asset). The accounting policy must be consistent and documented. When demo cars are sold after a few months of use, the auditor checks whether the reclassification from inventory to fixed assets was correctly timed, whether depreciation charges reflect actual wear, and whether the sale price is not below net carrying value at the date of disposal.
How do manufacturer warranties affect a dealer's provisions and profit?▾
A dealer may incur warranty repair costs before being reimbursed by the importer or OEM. The auditor verifies the completeness of provisions for work in progress under warranty, correct recognition of receivables from the importer for completed service work, and the timeliness of settlements. Incorrect presentation of warranty receivables and payables can materially distort the profitability of the aftersales operation – one of the most critical segments for a modern dealership's margins.
How does auditing a dealer group differ from a single showroom?▾
A dealer network requires either a consolidated audit or coordination of multiple individual entity audits. Additional challenges include: elimination of intercompany transactions (vehicle transfers between branches, shared back-office costs), a consistent accounting policy across the group, and a unified vehicle inventory valuation methodology. If the parent company reports to an international group, a consolidation package under IFRS – with intercompany eliminations – may also be required.