ABC Inc. has is being sued by a customer. The plaintiff (customer) claims $50,000 for product deficiencies. The controller discussed the claim with legal counsel and the lawyer notes that the company is likely to lose the suit with an estimated payout of $50,000. The controller has identified this as a contingent loss (liability) and has accrued it in the financial statements and prepared the note disclosure. The financial statement note disclosure states the following: "During the year, ABC Inc. received a claim for an alleged product deficiency. ABC Inc. is defending the action however legal advice at this time indicated that is likely the claim could result in a loss for ABC Inc." ABC Inc. reports under ASPE. Required: a) Provide the path to the appropriate reference in the Handbook assuming the entity follows ASPE. b) Indicate what is missing from the note disclosure, if anything, for ABC Inc.
ABC Inc. has is being sued by a customer. The plaintiff (customer) claims $50,000 for product deficiencies. The controller discussed the claim with legal counsel and the lawyer notes that the company is likely to lose the suit with an estimated payout of $50,000. The controller has identified this as a contingent loss (liability) and has accrued it in the financial statements and prepared the note disclosure. The financial statement note disclosure states the following: "During the year, ABC Inc. received a claim for an alleged product deficiency. ABC Inc. is defending the action however legal advice at this time indicated that is likely the claim could result in a loss for ABC Inc." ABC Inc. reports under ASPE. Required: a) Provide the path to the appropriate reference in the Handbook assuming the entity follows ASPE. b) Indicate what is missing from the note disclosure, if anything, for ABC Inc.
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter14: Completing A Quality Audit
Section: Chapter Questions
Problem 7RQSC
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