You Are Auditing Green Corporation for the Calendar Year 2009

question 16

Essay

You are auditing Green Corporation for the calendar year 2009.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 in September 2001.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, 2010.The financial statements were issued on March 14, 2010.The trial was in progress at that date.On March 20, 2010 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 you have, if any, regarding the news of March 20.

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Definitions:

Actual Productivity

The real output or results produced by an individual, group, or organization, as opposed to potential output or expected performance.

Faulty Process

An ineffective or flawed procedure that leads to undesired outcomes.

Disjunctive Tasks

Tasks for which the performance of the group is determined by the best individual performance within the group.

Social Loafing

describes the phenomenon where individuals exert less effort to achieve a goal when they work in a group than when they work alone.