Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

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Answer 1

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 24, Problem 24DQP

a.

To determine

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

b.

To determine

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

c.

To determine

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

d.

To determine

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

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Megan is performing an initial audit of a financial service institution. One of her first steps is to assess the reasonableness of opening balances. How should she proceed? a. Opening balances do not become easier to determine as experience is gained with a client, so Megan's procedures will be the same as for a continuing client. b. If the account balance turns over at least once an accounting period, Megan must perform extensive audit procedures. c. Megan can place reliance on the report submitted by the predecessor auditor, but that decision should be made by audit area. d. Because this is an initial audit, over auditing is not a concern; Megan must perform all possible procedures.

As part of the audit of different audit areas, auditors should bealert for the possibility of unrecorded liabilities. For each of the following audit areas oraccounts, describe a liability that can be uncovered and the audit procedures that canuncover it:a. Minutes of the board of directors meetings e. Cash surrender value of life insuranceb. Land and buildings f. Cash in the bankc. Rent expense g. Officers’ travel and entertainmentd. Interest expense expenses

1.Compile a working paper indicating all relevant information that should be included in the working paper. In your design and compilation of the working paper ensure that include the following elements:Audit Objective:Sample:Audit Procedures:Testing workings and results:Conclusion:

Answer 2

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 24, Problem 24DQP

a.

To determine

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

b.

To determine

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

c.

To determine

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

d.

To determine

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

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Answer 3

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 24, Problem 24DQP

a.

To determine

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

b.

To determine

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

c.

To determine

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

d.

To determine

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

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Answer 4

Question

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

Chapter 24, Problem 24DQP

a.

To determine

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

b.

To determine

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

c.

To determine

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

d.

To determine

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

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Answer 5

Chapter 24, Problem 24DQP

a.

To determine

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

b.

To determine

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

c.

To determine

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

d.

To determine

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

Answer 6

Chapter 24, Problem 24DQP

a.

To determine

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

Answer 7

Chapter 24, Problem 24DQP

a.

To determine

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

Answer 8

b.

To determine

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

Answer 9

b.

To determine

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

Answer 10

c.

To determine

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

Answer 11

c.

To determine

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

Answer 12

d.

To determine

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

Answer 13

d.

To determine

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 24 - Prob. 1RQ Ch. 24 - Explain why an auditor is interested in a clients...Ch. 24 - Prob. 3RQ Ch. 24 - Prob. 4RQ Ch. 24 - Prob. 5RQ Ch. 24 - Prob. 6RQ Ch. 24 - Prob. 7RQ Ch. 24 - Prob. 8RQ Ch. 24 - What major considerations should the auditor take...Ch. 24 - Identify five audit procedures normally done as a...

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

Concept explainers

Explain the difference between the contingent liabilities and commitments. Also, explain the importance of both in an audit.

List the three useful audit procedures that would be perform by the Person J during the audit program, even if Person J does not have responsibility for uncovering contingencies.

List the other three other procedures that person J would likely to perform specifically for the purpose of identifying undisclosed contingencies that would helps in obtaining evidence about the presentation audit objective.

List the three useful audit procedures for uncovering commitments that Person J would likely to perform as a part of the audit in other accounts.

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Chapter 24 Solutions