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Comprehensive Audit Procedures Checklist for Contingent Liabilities

This guide provides a detailed checklist for auditing contingent liabilities, including procedures for review, inquiries, and communication with attorneys to ensure comprehensive assessment.

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Comprehensive Audit Procedures Checklist for Contingent Liabilities

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  1. GOOD MORNING/AFTERNOON

  2. COMPLETING THE AUDIT • Review for Contingent Liabilities • Review for Subsequent Events • Perform Analytical Procedures • Evaluate Results • Evaluate Going Concern Assumption • Obtain Client Representation Letter • Issue Audit Report • Communicate with Audit Committee

  3. AUDIT PROCEDURES FOR CONTINGENT LIABILITIES • Make Inquires of Management • Review Minutes • Reviewing Documents (Contracts, Leases) • Confirmation with Banks • Analyze Legal Expense • Correspond with Attorneys

  4. INQUIRY OF CLIENT'S ATTORNEY(AU 337) • Letter Should Include: • Information Concerning Asserted Claims • Nature of Litigation • Progress of The Case • How Management Will Respond • Likelihood of Unfavorable Amount and Estimate of Amount • Omission of Any Litigation or List is Complete

  5. INQUIRY OF CLIENT'S ATTORNEY (CONTINUED) • Information Concerning Unasserted Claims • Nature of the Matter • How Management Will Respond • Likelihood of Unfavorable Outcome and Estimate of Amount • Confirmation of Understanding to Inform Management Regarding Unasserted Claims • Nature of any Limitations • Lawyer Refusal Requires Adjustment of Audit Report

  6. TYPES OF SUBSEQUENT EVENTS • Condition Existing at the Balance Sheet Date • Condition Not Existing at Balance Sheet Date

  7. AUDIT PROCEDURES FOR SUBSEQUENT EVENTS • Make Inquires of Management • Review Minutes • Review Internal Statements Prepared Subsequent to the Balance Sheet Date • Review Records Prepared Subsequent to the Balance Sheet Date • Obtain Letter of Representation • Correspond with Attorneys

  8. END OF AUDITANALYTICAL PROCEDURES • Assess Conclusions Reached • Evaluate Overall Financial Statement Presentations • Data • High Level of Aggregation • Financial • Type • Trend Analysis • Ratio Analysis

  9. EVALUATION OF RESULTS • Evaluate Misstatements Discovered • Evaluate Proposed Adjustments Not Recorded (Individually and in Aggregate) • Evaluate Financial Statement Disclosure • Obtain Letter of Representation • Review Working Papers

  10. GOING CONCERN EVALUATION • No Specific Procedures Required • If Matters Come to Auditors Attention During Audit Suggesting Going Concern Problems • Evaluate Management’s Plan to Address Going Concern Problems

  11. CLIENT REPRESENTATION LETTER(AU 333) • Document Written by the Client to the Auditor • Purpose • Confirm and Document Oral Representations Made by the Client • Reduce the Possibility of Auditor-Client Misunderstandings • The Letter is Not to be Used as a Substitute for Other Audit Procedures

  12. MANAGEMET REPRESENTATION LETTER (CONTINUED) • Information Included In Letter • Management Has Responsibility for the Financial Statements • Financial Statements Are Presented In Accordance with GAAP • Availability of All Financial Records And Related Data • Completeness And Availability Of Minutes Of Meetings Of Stockholders, Directors, and Committees of Directors • Completeness of Communications From Regulatory Agencies • All Transactions Have Been Recorded • Fraud Involving Management or Employees • Plans That May Affect Presentation of Assets And Liabilities • Related Party Transactions • Guarantees • Proper Disclosure of Significant Estimates and Concentration of Risks • Violations of Laws or Regulations • Unasserted Claims • Other Liabilities and Gain or Loss Contingencies • Title to Assets, Liens or Encumbrances on Assets, and Asses Pledged as Collateral • Compliance with Contractual Agreements • Subsequent Events

  13. MANAGEMENT REPRESENTATION LETTER (CONTINUED) • Letter Is Required • If Client Refuses Adjustment of Audit Report is Required

  14. ISSUE REPORT • Cross Reference Information Contained in Financial Statement to Working Papers • Read Other Information Contained in the Annual Report • Determine Type of Opinion Based on Evaluation of Audit Evidence • Cold Review of Working Papers

  15. COMMUNICATION WITH AUDIT COMMITTEE • Auditor Responsibility Under GAAS Audits • Auditor Responsibility for other Information Included with Financial Statements • Significant Accounting Policies (SAS 90 Quality) • Process Used in Obtaining Management Judgments • Audit Adjustments

  16. COMMUNICATION WITH AUDIT COMMITTEE (continued) • Auditor Views on Matters Other Auditors Were Contacted • Disagreements • Major Issues Discussed with Management Prior to Retention • Difficulties Encountered During Audit • Reportable Conditions • Misstatements and Frauds

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