Answered: In a factory, there are 200 full-time…

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

Chapter11: Auditing Inventory, Goods And Services, And Accounts Payable: The Acquisition And Payment Cycle

Section: Chapter Questions

Problem 27RQSC

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Question

In a factory, there are 200 full-time employees who all are exposed to the same risk. A
risk analysis for the factory has been performed and the following information has been
arrived at:
• The only type of accidents that can cause fatalities at the factory is fires.
• The frequency of fire is 0.0028 per year
• The average consequence if a fire occurs is 1.2 fatalities.
(a) Calculate AIR for the employees in the factory.
(b) Assume that the operation at the factory is changed and that a toxic chemical is introduced, leading to another type of accidents that may occur. If this is released, employees may be killed. The annual frequency of release is 4.2 × 10−4 , and the average consequence if a release occurs is 12 fatalities. Recalculate AIR for the employees in the factory taking into account the changes.
(c) Calculate FAR for both cases above.

>> it is a risk management question

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