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
- Distinguish between contingent liabilities and commitments and explain why both are important in an audit.
- Describe how Johnson's testing in phases I-III of the audit of notes payable might help her obtain evidence about the four presentation and disclosure objectives.
- Identify three 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.
- Identify three other procedures Johnson is likely to perform specifically for the purpose of identifying undisclosed contingencies.