Managerial auditors’ mixed cost forecasting assumption departure error estimates for litigation and professional liability risk reduction: the electronic security industry

Avi Rushinek (Department of Accounting, University of Miami, Coral Gables, Florida, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Publication date: 1 August 1997

Abstract

Managerial auditors (MAs) are frequently relying on mistaken mixed costs (MC) forecasting assumptions. Two such assumptions are that MC are linear within the relevant range and variable costs vary proportionately with activity levels. Departure from these assumptions can lead to understating expenses, overstating profits, and even to fraud, litigation, and mounting professional liability risk. Develops a forecasting model of mixed cost error estimates, or error difference (ED). MAs can reduce the risk of litigation and professional liability by including such an ED in the internal control structure of a company. Uses Sensormatic Corporation and the electronics security industry as sample case because of the recent prominence of litigation and professional auditor liability verdicts. Focuses on the electronics security industry, but some of the findings may apply to other industries.

Keywords

Citation

Rushinek, A. (1997), "Managerial auditors’ mixed cost forecasting assumption departure error estimates for litigation and professional liability risk reduction: the electronic security industry", Managerial Auditing Journal, Vol. 12 No. 6, pp. 285-297. https://doi.org/10.1108/02686909710180643

Download as .RIS

Publisher

:

MCB UP Ltd

Copyright © 1997, MCB UP Limited

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.
To rent this content from Deepdyve, please click the button.