case 12-07 Essay
Facts: Rossi Inc.: Asbestos Litigation Liability: The cost of settlement and defensed costs relating to currently pending claims and future claims for losses incurred to date.
Liabilities recorded per/as at Dec 31.
Thompson (External Specialist)
Internal Actuarial Specialist
$907m, $1,184m, and $1,514m
The 2007 claim estimate is projected through 2011. The 2008 and 2009 estimate are projected through 2017.
During 2009: The reserve is reduced by payment, but no addition; Higher mesothelioma settlement amounts (Est. 29k vs Act.34K); Higher legal expenses due to: 1. More aggressive approach and use of experts (many + verdicts); 2. martin, Smith, and …show more content…
3. Based on AU 342, the audit partner should evaluate the reasonableness of accounting estimates, with an attitude of professional skepticism, considering both the subjective and objective factors. The audit partner should obtain an understanding of how management developed the estimate, review and test the process used by management to develop the estimate. When the auditor tests the management process, the auditor should consider additional key factors or alternative assumptions about the factors, evaluate whether the assumptions are consistent with each other. Finally, the partner should also inquire about any other plans, goals, and objectives