For each situation listed below, select the appropriate inherent risk factor that is demonstrated. Each inherent risk factor can be used once, more than once, or not at all. a. A client is estimating an amount that may be owed pending the outcome of a lawsuit that may take several years to resolve. Estimation uncertainty b. Management hires a specialist to assist with determining the value of an inventory of precious gemstones. Complexity C Due to a global pandemic, the airline industry is experiencing unprecedented disruption of normal business operations. Subjectivity d. Management is estimating the fair value for a derivative financial instrument that is not traded on a public market. e. A client must derive a future interest rate by using interpolation techniques from forward interest rates.

For each situation listed below, select the appropriate inherent risk factor that is demonstrated. Each inherent risk factor can be used once, more than once, or not at all. a. A client is estimating an amount that may be owed pending the outcome of a lawsuit that may take several years to resolve. Estimation uncertainty b. Management hires a specialist to assist with determining the value of an inventory of precious gemstones. Complexity C Due to a global pandemic, the airline industry is experiencing unprecedented disruption of normal business operations. Subjectivity d. Management is estimating the fair value for a derivative financial instrument that is not traded on a public market. e. A client must derive a future interest rate by using interpolation techniques from forward interest rates.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

For each situation listed below, select the appropriate inherent risk factor that is demonstrated. Each inherent risk factor can be used
once, more than once, or not at all.
a.
A client is estimating an amount that may be owed pending the outcome of a lawsuit that
may take several years to resolve.
Estimation uncertainty
b.
Management hires a specialist to assist with determining the value of an inventory of
precious gemstones.
Complexity
C.
Due to a global pandemic, the airline industry is experiencing unprecedented disruption of
normal business operations.
Subjectivity
d.
Management is estimating the fair value for a derivative financial instrument that is not
traded on a public market.
e
A client must derive a future interest rate by using interpolation techniques from forward
interest rates.
B

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