The distinction between “pure risk” and “speculative risk” is important because only pure risks are normally insurable. Why is the distinction between “fundamental risk” and “particular risk” important

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
Chapter1: Quality Auditing: Why It Matters
Section: Chapter Questions
Problem 20CYBK: Which of the following factors is not an example of a risk relevant to the client continuance...
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  1. The distinction between “pure risk” and “speculative risk” is important because only pure risks are normally insurable. Why is the distinction between “fundamental risk” and “particular risk” important?
The distinction between pure and speculative
risks is an important one, because normally only
pure risks are insurable. Insurance is not concerned
with the protection of individuals against those
losses arising out of speculative risks. Speculative
risk is voluntarily accepted because of its two-
dimensional nature, which includes the possibility
of gain. Not all pure risks are insurable, and a fur-
ther distinction between insurable and uninsurable
pure risks may also be made. A discussion of this
difference will be delayed until Chapter 2.
Transcribed Image Text:The distinction between pure and speculative risks is an important one, because normally only pure risks are insurable. Insurance is not concerned with the protection of individuals against those losses arising out of speculative risks. Speculative risk is voluntarily accepted because of its two- dimensional nature, which includes the possibility of gain. Not all pure risks are insurable, and a fur- ther distinction between insurable and uninsurable pure risks may also be made. A discussion of this difference will be delayed until Chapter 2.
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