You are auditing Green Corporation for the calendar year 20X2. Among other items related to the audit, Green is being sued for personal injury resulting from the malfunction of one of its products. Sue Ewe filed the lawsuit 8 years earlier in September 20W4. The officers of the company and its outside legal counsel estimate that the loss from the suit will be approximately $250,000. This amount has been accrued and properly disclosed in the footnotes of the financial statements. You have no reason to believe that the estimate is wrong. You completed your audit and dated your report March 2, 20X3. The financial statements were issued on March 14, 20X3. The trial was in progress at that date. On March 20, 20X3, you read in a national business periodical that the jury in the trial awarded
Sue Ewe $1.5 million.
Required:
Discuss the nature of these events and what responsibility the auditor has, if any,
regarding the news of March 20.
The auditor has no responsibility with regard to the March 20 outcome because it occurred after the
fieldwork was completed and after the financial statements were issued. Since the best estimate had been
properly recorded and disclosed in the financial statements issued, the auditor has no additional
responsibility in this situation.
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Under the accrual basis of accounting, the allowance method is generally required for financial reporting purposes
a. True b. False Indicate whether the statement is true or false
Mellon Corporation The data presented below is for Mellon Corporation for the year ended December 31, 2016: Sales (100% on credit) $1,500,000 Sales returns 60,000 Accounts Receivable (December 31, 2016) 250,000 Allowance for Doubtful Accounts [Credit Balance] (Before adjustment at December 31, 2016 3,000 Estimated amount of uncollectible accounts based on an aging analysis 31,000 Refer to the
information for Mellon Corporation. If Mellon uses the aging of accounts receivable approach to estimate its bad debts, what will be the net realizable value of its accounts receivable after the adjustment for bad debt expense? a. $216,000 b. $219,000 c. $222,000 d. $250,000
______________occurs when information is not passed on to the supervisor.
a. Gatekeeping b. Summarization c. General distortion d. Withholding
The formula for the variance of the duration of an activity is ______.
A. the square root of [1/6(b – a)] B. [1/6(a – b)] raised to the power of 2 C. [1/6(b – a)] raised to the power of 2 D. the square root of [1/6(a – b)]