Elizabeth Johnson, CPA, has completed the audit of notes payable

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.

a. Distinguish between contingent liabilities and commitments and explain why both are important in an audit.
b. 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.
c. 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.
d. Identify three other procedures Johnson is likely to perform specifically for the purpose of identifying undisclosed contingencies.

Contingent liabilities
A contingent liability is an obligation of business related to an uncertain future event. The business must record it in its financial statements if the amount can be reliably estimated and it is probable that amount will be paid by business as a...


  • Access to 2 Million+ Textbook solutions
  • Ask any question from 24/7 available



Get help from Auditing Tutors
Ask questions directly from Qualified Online Auditing Tutors .
Best for online homework assistance.