BUS 426 Study Guide - Final Guide: Contingent Liability, Patent Infringement, Financial Statement

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Completing the audit: e(cid:454)plai(cid:374) the audito(cid:396)"s (cid:396)espo(cid:374)si(cid:271)ilities (cid:449)ith (cid:396)espe(cid:272)t to (cid:272)o(cid:374)ti(cid:374)ge(cid:374)t lia(cid:271)ilities, i(cid:374)(cid:272)ludi(cid:374)g goi(cid:374)g (cid:272)o(cid:374)(cid:272)e(cid:396)(cid:374) considerations and related audit reporting responsibilities. Auditors are especially concerned about certain contingent liabilities: pending litigation for patent infringement, product liability, or other actions. Income tax disputes: note receivable discounted, product warranties, guarantees of obligations of others, unused balances in outstanding letters of credit. Audito(cid:396)"s o(cid:271)je(cid:272)ti(cid:448)e i(cid:374) (cid:448)e(cid:396)if(cid:455)i(cid:374)g the (cid:272)o(cid:374)ti(cid:374)ge(cid:374)t lia(cid:271)ilities: evaluate the accounting treatment of all known contingencies to determine whether the management has properly classified them. Identify any contingencies that are not already identified by management (completeness) Process: determine whether any contingencies exist, once the auditor knowns the existence, evaluate their materiality and the footnote disclosures to be adequate. Identify any events that have impact on the fair presentation of financial statements: normally limited to the balance sheet date and the audit report date.