Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Question

Want to see more full solutions like this?

Answer 1

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 1RQ

To determine

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Expert Solution & Answer

Explanation of Solution

The Certified Public Accountant’s liability:

The accountants have both common law and statutory law liability. Common law liability emerges through court decisions for negligence, breach of contract, and fraud. Statutory liability is developed when the governmental units enforce laws and regulations either explicitly or implicitly imposed the liability on the accountants.

The reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals:

The important reason is the area of liability based on the users of the financial statements as prepared and audited by the auditors. When there are small misstatements in the financial statements its impact results in heavy loss incurred by the users and the potential users of those financial statements. The auditor’s liability is not restricted to the parties to the contract but includes third-party users also. Malpractice suits usually turn to be a small dollar recovery suits with huge litigation cost in any profession.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

I need help with this solution and general accounting question

Eddie Woodworks manufactures custom shelving. During the most productive month of the year, 4,200 units were manufactured at a total cost of $73,500. In the month of lowest production, the company made 1,600 units at a cost of $49,800. Using the high-low method of cost estimation, total fixed costs are__. a. $22,200 b. $30,600 c. $35,208 d. $45,000

Please give me true answer this financial accounting question

Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 1RQ

To determine

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Expert Solution & Answer

Explanation of Solution

The Certified Public Accountant’s liability:

The accountants have both common law and statutory law liability. Common law liability emerges through court decisions for negligence, breach of contract, and fraud. Statutory liability is developed when the governmental units enforce laws and regulations either explicitly or implicitly imposed the liability on the accountants.

The reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals:

The important reason is the area of liability based on the users of the financial statements as prepared and audited by the auditors. When there are small misstatements in the financial statements its impact results in heavy loss incurred by the users and the potential users of those financial statements. The auditor’s liability is not restricted to the parties to the contract but includes third-party users also. Malpractice suits usually turn to be a small dollar recovery suits with huge litigation cost in any profession.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 1RQ

To determine

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Expert Solution & Answer

Explanation of Solution

The Certified Public Accountant’s liability:

The accountants have both common law and statutory law liability. Common law liability emerges through court decisions for negligence, breach of contract, and fraud. Statutory liability is developed when the governmental units enforce laws and regulations either explicitly or implicitly imposed the liability on the accountants.

The reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals:

The important reason is the area of liability based on the users of the financial statements as prepared and audited by the auditors. When there are small misstatements in the financial statements its impact results in heavy loss incurred by the users and the potential users of those financial statements. The auditor’s liability is not restricted to the parties to the contract but includes third-party users also. Malpractice suits usually turn to be a small dollar recovery suits with huge litigation cost in any profession.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 4, Problem 1RQ

To determine

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Expert Solution & Answer

Explanation of Solution

The Certified Public Accountant’s liability:

The accountants have both common law and statutory law liability. Common law liability emerges through court decisions for negligence, breach of contract, and fraud. Statutory liability is developed when the governmental units enforce laws and regulations either explicitly or implicitly imposed the liability on the accountants.

The reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals:

The important reason is the area of liability based on the users of the financial statements as prepared and audited by the auditors. When there are small misstatements in the financial statements its impact results in heavy loss incurred by the users and the potential users of those financial statements. The auditor’s liability is not restricted to the parties to the contract but includes third-party users also. Malpractice suits usually turn to be a small dollar recovery suits with huge litigation cost in any profession.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 4, Problem 1RQ

To determine

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Expert Solution & Answer

Explanation of Solution

The Certified Public Accountant’s liability:

The accountants have both common law and statutory law liability. Common law liability emerges through court decisions for negligence, breach of contract, and fraud. Statutory liability is developed when the governmental units enforce laws and regulations either explicitly or implicitly imposed the liability on the accountants.

The reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals:

The important reason is the area of liability based on the users of the financial statements as prepared and audited by the auditors. When there are small misstatements in the financial statements its impact results in heavy loss incurred by the users and the potential users of those financial statements. The auditor’s liability is not restricted to the parties to the contract but includes third-party users also. Malpractice suits usually turn to be a small dollar recovery suits with huge litigation cost in any profession.

Answer 6

Chapter 4, Problem 1RQ

To determine

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Expert Solution & Answer

Explanation of Solution

The Certified Public Accountant’s liability:

The accountants have both common law and statutory law liability. Common law liability emerges through court decisions for negligence, breach of contract, and fraud. Statutory liability is developed when the governmental units enforce laws and regulations either explicitly or implicitly imposed the liability on the accountants.

The reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals:

The important reason is the area of liability based on the users of the financial statements as prepared and audited by the auditors. When there are small misstatements in the financial statements its impact results in heavy loss incurred by the users and the potential users of those financial statements. The auditor’s liability is not restricted to the parties to the contract but includes third-party users also. Malpractice suits usually turn to be a small dollar recovery suits with huge litigation cost in any profession.

Answer 7

Chapter 4, Problem 1RQ

To determine

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Answer 8

Expert Solution & Answer

Explanation of Solution

The Certified Public Accountant’s liability:

The accountants have both common law and statutory law liability. Common law liability emerges through court decisions for negligence, breach of contract, and fraud. Statutory liability is developed when the governmental units enforce laws and regulations either explicitly or implicitly imposed the liability on the accountants.

The reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals:

The important reason is the area of liability based on the users of the financial statements as prepared and audited by the auditors. When there are small misstatements in the financial statements its impact results in heavy loss incurred by the users and the potential users of those financial statements. The auditor’s liability is not restricted to the parties to the contract but includes third-party users also. Malpractice suits usually turn to be a small dollar recovery suits with huge litigation cost in any profession.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Ch. 4 - Prob. 1RQ Ch. 4 - Prob. 2RQ Ch. 4 - Prob. 3RQ Ch. 4 - Prob. 4RQ Ch. 4 - Prob. 5RQ Ch. 4 - Prob. 6RQ Ch. 4 - Prob. 7RQ Ch. 4 - Prob. 8RQ Ch. 4 - Prob. 9RQ Ch. 4 - Prob. 10RQ

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Explain the reason for the potential liability of auditors for professional malpractice exceeding physicians or other professionals.

Explanation of Solution

Want to see more full solutions like this?

Chapter 4 Solutions