Write short note on Audit of contingent liabilities

Auditing and Assurance Revision Questions and Answers

The auditor may take following steps to verify the contingent liabilities:
ii. Inspect the minute books of the company to ascertain all contingent liabilities known to the company.
iii. Examine the contracts entered into by the company and the likelihood of contingent liabilities emanating there from.
iv. Scrutinize the lawyer‟s bills to track unreported contingent liabilities.
v. Examine bank letters in respect of bills discounted and not matured.
vi. Examine bank letters to ascertain guarantees on behalf of other companies or individuals.
vii. Discuss with various functional officers of the company about the possibility of contingent liability existing in their respective field.
viii. Obtain a certificate from the management that all known contingent liabilities have been included in the accounts and they have been properly disclosed.
ix. Ensure that proper disclosure has been made as per set standards, Provisions, Contingent Liabilities and Contingent Assets.

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