You Are Auditing Green Corporation for the Calendar Year 2012

question 25

Essay

You are auditing Green Corporation for the calendar year 2012.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 initiated the lawsuit in September 2012.Management and the company's outside legal counsel estimated the loss from the suit to be approximately $250,000.This amount is accrued and properly disclosed in the footnotes of the financial statements.You have no reason to believe that the estimate is inaccurate.You completed your audit and dated your report March 2,2013.The financial statements were issued on March 14,2013.On March 20,2013,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,if any,you have regarding the news of March 20,2013.

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Definitions:

Unit Variable Costs

The costs that vary directly with the volume of production, such as materials and labor, on a per-unit basis.

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities they require, focusing on the cost causation.

Cost Volume Profit Analysis

Cost volume profit analysis is a financial technique that examines the impact of changing levels of costs and volume on a company's profit, aiding in decision-making.

Production Volume

The total number of units of a product or service produced by a company in a specific period of time.