Discuss how contingent liabilities, commitments, and subsequent events can impact a company and/or its financial statements. Why is it important that these items are identified and disclosed? What are auditors procedures to identify these items? Hint: Audit procedures to identify these items are: * Inquire management (orally and in writing) about the possibility of unrecorded contingencies, Review current and previous years internal revenue agent reports for income tax settlements, Review the minutes of directors and stockholders meetings for indications of lawsuits or other contingencies, Analyze legal expense for the period under audit and review invoices and statements from legal counsel for indications of contingent liabilities, especially lawsuits and pending tax assessments, Obtain a letter from each major attorney performing legal services for the client as to the status of pending litigation, Review audit documentation for any information that may indicate a potential contingency and Examine letters of credit in force as of the balance sheet date and obtain a confirmation of the used and unused balances. Please focus on the impact and the importance, not the definition !!!!