BU477 Chapter Notes - Chapter 18: Income Tax, Patent Infringement, Internal Control
Document Summary
Evaluate evidence from earlier phases to assess if more evidence is needed for presentation and disclosure objectives. Primary concern: determine if management has disclosed all required info. Final review for f/s disclosure many pa firms require completion of f/s. Auditors especially concerned about certain contingent liabilities: pending litigation for patent infringement, product liability, or other actions. Income tax disputes: product warranties, notes receivable discounted, guarantees of obligations of others, unused balances in o/s letters of credits. Objectives in verifying contingent liabilities: evaluate accounting treatment of known contingent liabilities to determine if mgmt. has properly classified contingency (classification) Identify contingencies not already identified by mgmt. (completeness) Commitments: agreements that entity will hold to fixed set of conditions at future date, regardless of what happens to profits or to economy. Search for unknown commitments is usually performed as part of audit of each audit area. Auditor should be aware of possibility of commitments when reading minutes, contracts, and correspondence files.
