a. Distinguish between contingent liabilities and commitments and explain why both are important in an audit.
b. 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.
c. Also, Identify three other procedures Johnson is likely to perform specifically for the purpose of identifying undisclosed contingencies. This is to help her obtain evidence about the presentation audit objective.
d. Lastly, identify three useful audit procedures for uncovering commitments that Johnson will likely perform as part of the audit in other accounts
Elizabeth Johnson, CPA, has completed the audit of notes payable and other liabilities for Valley River Electrical Services. Currently plans to audit contingent liabilities and commitments.
analyzing legal expense for the Boastman Bottle Company, Mary Little, CPA,
24-26 (A-B).
In analyzing legal expense for the Boastman Bottle Company, Mary Little, CPA. Observes that the company has paid legal fees to three different law firms during the current year. Also, in accordance with her CPA firm’s normal operating practice, Little requests standard attorney letters as of the balance sheet date from each of the three law firms.
On the last day of performing audit procedures, Little notes that one of the attorney letters has not yet been receive-d. The second letter contains a statement to the effect that the law firm deals exclusively in registering patents and refuses to comment on any lawsuits or other legal affairs of the client.
The third attorney’s letter states that there is an outstanding unpaid bill due from the client and recognizes the existence of a potentially material lawsuit against the client but refuses to comment further to protect the legal rights of the client.
Evaluate Little’s approach to sending the attorney letters and her follow-up on the responses
Also, evaluate Little’s approach to sending the attorney letters and her follow-up on the responses.
Secondly, what should Little do about each of the letters?
24-27 (A-H).
The field work for the June 30, 2019. Audit of Tracy Brewing Company was finished August 19, 2019, and the completed financial statements, accompanied by the
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