When auditing contingent liabilities, which of the following procedures would be MOST effective?a.Reviewing the allowance for doubtful accounts.b.Reviewing the bank cutoff statement.c.Examining customer confirmation replies.d.Examining invoices for repairs expense.e.Abstracting the minutes of the board of directors.

One kind of potential financial obligation known as a contingent liability is one that is predicated…

Answered: When auditing contingent liabilities,…

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter2: Audits Of High-risk Accounts

Section2.7: Bankrate, Inc.

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When auditing contingent liabilities, which of the following procedures would be MOST effective?

Reviewing the allowance for doubtful accounts.

Reviewing the bank cutoff statement.

Examining customer confirmation replies.

Examining invoices for repairs expense.

Abstracting the minutes of the board of directors.

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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