Financial Auditing Please list

1.Under GAAP, a contingentliability is defined as any potential future loss that depends on a”triggering event” to turn into an actual expense. … There arethree GAAP-specified categories ofcontingent liabilities: probable, possible, andremote. Probable contingencies are likely to occurand can be reasonably estimated.

2.

Auditors usually ask management to write a statementacknowledging they disclosed all known contingentliabilities.

1. Search for Undisclosed Contingencies. In a perfect world,management would disclose all contingentliabilities to their auditors. …
2. Evaluate Materiality. …
3. Evaluate Event Likelihood. …
4. Look at Probable Events.

3.Errors or omissions in applying GAAP can becostly in a business transaction; impacting credibility withlenders and leading to incorrect decisions. Theseviolations can cause inaccurate reporting forinternal and budgeting purposes, as well as a reduced reliance onprepared financial statements for 3rd party readers.

4.The inability of the auditor to gather sufficient appropriateaudit evidence is technically termed as limitation on scopeof auditor’s work or limitation on the scope ofaudit i.e. auditor has been restricted to perform hiseffectively and in the absence of evidence auditor is not able toreach conclusions and without relevant conclusions auditor cannotform audit opinion.

However, limitation on scope of audit does not equate inabilityto perform certain audit procedure where auditor can obtainsufficient appropriate audit evidence by applying alternative auditprocedure. Auditor most of the time able to substitute oneprocedure with the other if one is not working.

5.If a contingent liability is a material amount or the amountcan’t be estimated, auditors should estimate the likelihood thatthe event will occur. … The company must disclose materialcontingent liabilities that are possible or probable by adding afootnote to the financial statement