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Mary Smith, CPA, has completed the audit of notes payable and other liabilities for Red Fox Ranch and now plans to audit for contingent liabilities and commitments.
Distinguish between contingent liabilities and commitments and explain why both are important in an audit.
Identify three useful audit procedures for uncovering contingent liabilities that Smith will likely perform in the normal conduct of the audit, even if she has no responsibility for uncovering contingencies.
Identify three other procedures Smith is likely to perform specifically for the purpose of identifying undisclosed contingencies to help her obtain evidence about the completeness presentation and disclosure objective.
Identify three useful audit procedures for uncovering commitments that Smith will likely perform as part of the audit of other accounts.
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