Distinguish between contingent liabilities and commitments and explain why both are important in an audit. Identify 3 useful audit procedures for uncovering contingent liabilities that Johnson will likely perform in the normal conduct of the audit, even if she had no responsibility for uncovering contingencies.

Week 15 – Discussion

Elizabeth Johnson, CPA has completed the audit of notes payable and other liabilities for Valley River Electrical Services and now plans to audit contingent liabilities and commitments.

Required:

a. Distinguish between contingent liabilities and commitments and explain why both are important in an audit.

b. Identify 3 useful audit procedures for uncovering contingent liabilities that Johnson will likely perform in the normal conduct of the audit, even if she had no responsibility for uncovering contingencies.

c. Identify 3 other procedures Johnson is likely to perform specifically for the purpose of identifying undisclosed contingencies to help her obtain evidence about the completeness presentation and disclosure objective.

d. Identify 3 useful audit procedures for uncovering commitments that Johnson will likely perform as part of the audit in other accounts.