REPLACEMENT VALUE CONCEPT Definition

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REPLACEMENT VALUE CONCEPT, in insurance, is loss coverage for assets at the cost required to purchase like assets at market value. The replacement value concept eliminates the often troublesome factor of used or depreciated value when claims for losses are adjusted.

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INCOMPETENCE is lack of physical or intellectual ability or qualifications.

ANALYTICAL PROCEDURE is a comparison of financial statement amounts with an auditor's expectation. An example is to compare actual interest expense for the year (a financial statement amount) with an estimate of what that interest expense should be. The estimate can be found by multiplying a reasonable interest rate times the average balance of interest bearing debt outstanding during the year (the auditor's expectation). If actual interest expense differs significantly from the expectation, the auditor explains the difference in audit documentation.

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