TAILIEUCHUNG - Lecture Auditing and assurance services (International edition) - Chapter 17: Completing the engagement

In this chapter, the learning objectives are: Be able to explain the audit issues related to contingent liabilities, know the audit procedures used to identify contingent liabilities, understand the audit issues related to a legal letter, be able to explain why the auditor must be concerned with client commitments. | Chapter Seventeen Completing the Engagement Contingency A contingency is a liability that is uncertain because the possible outflow of resources from the entity will ultimately be resolved when some future event occurs or fails to occur. Probable: The future event is likely to occur. Neither probable nor remote: The chance of the future event occurring is less than likely but more than slight (remote). Remote: The chance of the future event occurring is slight. Examples Pending or threatened litigation; Actual or possible claims and assessments; Income tax disputes; Product warranties or defects; Guarantees of obligations to others; Agreements to repurchase receivables that have been sold. Audit Procedures for Identifying Contingencies Read minutes of meetings of those charged with governance, . the board of directors. Review contracts, loan agreements, leases and correspondence from government agencies. Confirm or otherwise document guarantees and letters of credit. Inspect other documents for possible guarantees. Review income tax liability, tax returns and tax authorities’ reports. Audit Procedures for Identifying Contingencies Inquiry and discussion with management about its policies and procedures for identifying, evaluating and accounting for contingencies. Examine documents in the entity’s records such as correspondence and invoices from lawyers for pending or threatened lawsuits. Obtain a legal letter that describes and evaluates any litigation, claims, or assessments. Obtain written representation from management that all litigation, asserted and unasserted claims, and assessments have been disclosed in accordance with the applicable financial reporting framework. Specific Audit Procedures Conducted Near Completion of Audit Legal Letters A letter of audit inquiry (a legal letter) sent to the client’s lawyers is the primary means of obtaining or corroborating information about litigation, claims, and assessments. Commitments Long-term commitments .

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• Financial statement auditing
• Audit planning
• Internal control
• Auditing business processes
• Audit engagement
• Auditing services
• Assurance services
• Auditing internal control
• Financial statement auditing environment
• Auditing demands logic
• Auditing environment
• Financial reporting
• Income statement accounts
• Financial statement audit
• Auditing the purchasing process
• Auditing the financing
• Internal auditing services