THE AUDITOR’S LIABILITY CHAPTER OBJECTIVE 1. NEGLIGENCE 2. LIABILITY IN TORT 3. QUALITY CONTROL 1. NEGLIGENCE Negligence is some act or omission which occurs because the person concerned has failed to exercise the degree of care and skill appropriate to the circumstances. In simple terms, negligence is the legal term for carelessness. Auditors may face negligence claims under two distinct
Continue reading Profitability Index (PI) for Mutually Exclusive Project Mutually exclusive project is different from independent project. For mutually exclusive project, we can accept project A or B or deny both, but we cannot accept both projects. We may solve mutually exclusive projects using PI with following way: Compute incremental PI solved via cash flows from project A minus project B, If
Continue reading PROFITABILITY INDEX (PI) FOR INDEPENDENT PROJECT Company may have some projects to make decision invest or not. The independent project is one whose acceptance or rejection is independent of the acceptance or rejection of the other projects. PI = PV/I PV: sum of present value of cash flows subsequent to initial cash flow I: initial cash flow Accept/Reject Decision: if
Continue reading PROFITABILITY INDEX (PI) Profitability index (PI) is the present value of an investment’s future cash flows divided by its initial cost. Also, it is benefit-cost ratio. PI = PV/I PV: sum of present value of cash flows subsequent to initial cash flow I: initial cash flow Accept/Reject Decision: if PI>1=> accept the project if PI<1=> reject the project Advantages of
Continue reading The following topics are for your research:
Continue reading Internal Rate for Return (IRR) for Mutually Exclusive Project Mutually exclusive project is different from independent project. For mutually exclusive project, we can accept project A or B or deny both, but we cannot accept both projects. We may solve mutually exclusive projects using IRR with following way: Compute incremental IRR solved via cash flows from project A minus project
Continue reading Internal Rate of Return (IRR) for Independent Project Company may have some projects to make decision invest or not. The independent project is one whose acceptance or rejection is independent of the acceptance or rejection of the other projects. Internal rate of return (IRR) is the discount rate that makes Net Present Value (NPV) of investment zero. NPV =sum of
Continue reading Multiple Internal Return of Return (IRR) for Mixture Project Internal rate of return (IRR) is the discount rate that makes Net Present Value (NPV) of investment zero. NPV = initial cash flow – sum of present value of each cash outflow + sum of present value of each cash inflow Mixture project has multiple IRRs. In theory, a cash flow
Continue reading Internal Rate of Return (IRR) for Financing Project Internal rate of return (IRR) is the discount rate that makes Net Present Value (NPV) of investment zero. NPV= Cash receipt – sum of present value of each cash outflow when NPV= 0, so Cash receipt = sum of present value of each cash outflow Investing project has only one IRR. Project
Continue reading Internal Rate of Return (IRR) for Investing Project Internal rate of return (IRR) is the discount rate that makes Net Present Value (NPV) of investment zero. NPV =sum of present value of each cash inflow – initial investment when NPV=0, so sum of present value of each cash inflow =initial investment Investing project has only one IRR. To determine
Continue reading