A424Chapter24HW

A424Chapter24HW - Chapter 24 Homework 24-27 a. A contingent...

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Chapter 24 Homework 24-27 a. A contingent liability is a potential future obligation to an outside party for an unknown amount resulting from activities that have already taken place. The most important characteristic of a contingent liability is the uncertainty of the amount; if the amount were known it would be included in the financial statements as an actual liability rather than as a contingency. b. Audit procedures to learn about these items would be as follows: The following procedures apply to all three items: Discuss the existence and nature of possible contingent liabilities with management and obtain appropriate written representations. Review the minutes of directors' and stockholders' meetings for indication of lawsuits or other contingencies. Analyze legal expense for the period under audit and review invoices and statements of legal counsel for indications of contingent liabilities. Obtain letters from all major attorneys performing legal services for the client as to the status of pending litigation or other contingent liabilities. The following are additional procedures for individual items: Lawsuit Judgment no additional procedures; see above list of procedures applicable to all three items. Stock dividend Confirm details of stock transactions with registrar and transfer agent. Review records for unusual journal entries subsequent to
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A424Chapter24HW - Chapter 24 Homework 24-27 a. A contingent...

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