surers is that there is a risk that a person will act differently if he/she does not bear all of the consequences of his/her actions. For instance, people with auto insurance policies may drive less carefully than they would drive if they were going to have to pay the full amount of any damages they caused/created. This problem is known as: A. Adverse selection B. Consumer deception C. Moral hazard D. Insuranc

surers is that there is a risk that a person will act differently if he/she does not bear all of the consequences of his/her actions. For instance, people with auto insurance policies may drive less carefully than they would drive if they were going to have to pay the full amount of any damages they caused/created. This problem is known as: A. Adverse selection B. Consumer deception C. Moral hazard D. Insuranc

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter4: Professional Legal Liability

Section: Chapter Questions

Problem 15RQSC

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Similar questions

At one time, it was felt that liability insurance would undermine the tort system, which has as its central theorem the concept that the individual responsible for injuring another should be made to pay for that injury. Do you think the existence of liability insurance causes one to be less careful than he or she might otherwise be?
Moral hazard occurs when someone increases their exposure to risk when insured, especially when a person takes more risks because someone else bears the cost of those risks and usually occurs before asymmetric information Select one: True False
A life insurance company worries that people with low risk of dying will not buy insurance because the premium is too high relative to their risk. What problem does this refer to? adverse selection moral hazard O free rider O negative externality
Suppose health-care reform Y makes it unlawful for insurance companies to deny insurance to persons with a preexisting disease and sets a fine for those people who do not buy insurance. It follows that if the fine is a. larger than the benefits derived from not buying insurance right away, then people will not buy the insurance and pay the fine. b. smaller than the benefits derived from not buying the insurance right away, then people will not buy the insurance and pay the fine. c. There is not enough information provided to answer this question. d. larger than the benefits derived from not buying insurance right away, then people will buy the insurance right away and not pay the fine.
Insurance planning is important to protect a person from an unforeseen event like premature death, disability, illness, property loss, liability or unemployment. However, conventional insurance is prohibited in the Shariah because _____ a. It involves conventional investment planner. b. It is against the faith of destiny (qada wa qadar) that everything is decided by Allah the almighty c. It involves uncertainty (gharar) in the transaction
MATCH WITH THE BEST ANSWER Liability Insurance Mistakes happen. You, your employees, your equipment or your suppliers could make mistakes that ultimately end up hurting your customers, your employees or other people who are involved with your business. To protect your business from being sued, you should consider these types of insurance to limit your liability: 1. ____General liability A. Provides protection if you are sued by a client for errors, omissions or negligence, when performing professional services. 2. ____Product liability B. Covers injury to clients or staff on your premises. 3. ____ Professional liability insurance C. Provides protection in the event that your products are defective or cause serious harm to those using them.
1. Can both moral hazard and adverse selection occur in the insurance market? What is the difference between the two? Explain using your own words and you can use examples to illustrate.
If Jack damages his car by skidding on ice and colliding with a fence, his property damage liability would cover the damage to his car. True False Your insurance policy carries a $200 deductible for collision and $500 deductible for comprehensive. If you cause an accident which results in the following repairs and losses to your car and possessions, what will be the reimbursement from the insurance company under your collision and comprehensive coverage? • Replacement of trailer hitch $500 • Replacement of rear bumper $700 • Replacement of computer (in trunk) $400 • Replacement of rear windshield $400 $1500 $1800 $1400 Onothing
Having inaccurate financial statements that can harm society would correspond with the ethical perspective of distributive justice. Discuss
Can moral hazard in the market for insurance exist without adverse selection? Explain
6. Explain how moral hazard could lead people to under-save if social security were replaced by voluntary personal accounts.
Answer the following based on the image of the scenario A-Help management understand the issue from Jack’s perspective. Describe the ethical dilemma that Jack faces. What is the issue? Who are the parties involved? If you were Jack, what would you consider when making a decision? B-Help management understand the elements of the fraud triangle in this situation which increase the chances of fraud. Why is this fraud? What are the opportunities, motivations and rationalizations that you see? How does this affect the business financially? C-Help management come up with a plan to minimize the likelihood of this happening in the future. Be sure to mention specific components of the COSO framework.