How to Audit Contingencies
Learn how to audit contingent obligations, from risk assessment through final reporting. Examine techniques for identifying unrecorded contingencies, evaluating internal controls, and investigating litigation, guarantees, warranties, and other exposures. Discover how to assess loss probabilities, test management estimates, and verify evidence. In addition, you can explore procedures for reviewing subsequent events, evaluating disclosures, identifying material misstatements, and supporting well-documented audit conclusions.
Format
PDF Course
Course Lists
Duration
14 Hours
Course Information
Author: Steven Bragg
NASBA Category: Auditing
NASBA Category: Auditing
Course Number: AU1049
Not Acceptable For: Enrolled Agents
Not Acceptable For: Enrolled Agents
Table of Contents
Chapter 1. Planning the Contingency Audit
Chapter 2. Assessing Risks and Internal Controls
Chapter 3. Identifying Unrecorded Contingencies
Chapter 4. Auditing Litigation and Legal Claims
Chapter 5. Auditing Other Contingent Obligations
Chapter 6. Evaluating Loss Probabilities
Chapter 7. Auditing Contingency Estimates
Chapter 8. Reviewing Subsequent Events
Chapter 9. Audit Findings
Chapter 3. Identifying Unrecorded Contingencies
Chapter 4. Auditing Litigation and Legal Claims
Chapter 5. Auditing Other Contingent Obligations
Chapter 6. Evaluating Loss Probabilities
Chapter 7. Auditing Contingency Estimates
Chapter 8. Reviewing Subsequent Events
Chapter 9. Audit Findings
Learning Objectives
- Identify the audit requirements for evaluating contingent obligations, including their recognition, measurement, and disclosure under applicable accounting standards. Recognize factors affecting audit scope and materiality, and specify appropriate procedures for identifying contingencies, evaluating new information, and obtaining external evidence.
- Recognize contingency risk factors, assess inherent risk, and identify weaknesses in the control environment and contingency identification procedures. Specify appropriate methods for testing monitoring controls, evaluating control exceptions, and identifying financial statement assertions affected by contingency-related misstatements.
- Identify audit procedures for detecting unrecorded contingencies through legal inquiries, board minutes, contractual provisions, regulatory correspondence, and legal expense records. Recognize methods for evaluating prior-year contingencies, investigating unexplained changes in liabilities, and identifying additional exposures requiring financial reporting consideration.
- Recognize the appropriate audit procedures for identifying and evaluating litigation and legal claims, obtaining and reconciling legal confirmations, assessing the status of legal proceedings, and determining the reasonableness of litigation loss estimates and accruals.
- Identify the audit procedures used to evaluate guarantees, warranty obligations, environmental remediation liabilities, uncertain tax positions, regulatory penalties, and contractual commitments. Specify the circumstances affecting liability recognition, measurement, and disclosure, including the treatment of cancellation penalties and insurance recoveries.
- Recognize the accounting requirements for evaluating loss probabilities, including the treatment of related claims and uncertain tax positions. Identify appropriate procedures for assessing management’s assumptions, evaluating potential bias, corroborating probability classifications with reliable evidence, and determining whether changes in circumstances justify revisions to recorded liabilities.
- Identify appropriate methods for auditing contingency estimates, including evaluating estimation methodologies, assessing the reasonableness of significant assumptions, testing the reliability of supporting data, examining relationships among potential loss outcomes, and developing independent estimates to evaluate recorded liabilities.
- Recognize the appropriate procedures for identifying and evaluating subsequent contingency events, including post-year-end legal developments, settlements, and payments. Specify how to assess continuing obligations, distinguish changes in contingency estimates, and determine whether subsequent information affects year-end financial reporting.
- Identify the appropriate procedures for communicating contingency audit findings and evaluating their combined significance. Identify the circumstances requiring modified audit opinions, emphasis-of-matter paragraphs, and additional going-concern reporting.
Instructional Method: QAS Self-Study
Prerequisites: None
Program Knowledge Level: Basic
Program Knowledge Level: Basic
Advance Preparation: None
Latest Review Date: November 2026
Program Registration Requirements: Click on the Enroll button to pay for and access the course. You will then be able to download the course as a PDF file, then take an on-line examination, and then download a certificate of completion if you pass the examination.
Program Refund Policy: For more information regarding administrative policies concerning complaints, refunds, and other matters, see our policies page.