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The audit procedures on contingencies normally include the
following:
1.
Review the description of service charges for legal and other
professional fees.
2.
Obtain from management a list of pending litigations.
3.
Inquire the client’s legal counsels and other professional service
providers for:
A.
Whether there was any pending legal disputes such as tax,
environmental, and/or labor related. Inquire the nature and timing
of occurrence as appropriate.
B.
Professional opinions regarding the possibility, amounts, and scope
of the gain or loss of the above contingencies.
4.
Review tax returns assessed and tax payments made for all years and
ensure whether there are any pending administrative appeals.
5.
Review all minutes of board meetings, shareholders’ meetings, and
other important meetings thru the end of the field work.
6.
Review loan agreements, lease contracts, other major contracts and
memoranda regarding guarantees and endorsements.
7.
Inquire the management of any significant contingencies not yet
disclosed.
8.
Confirm with financial institutions for any discounted notes or
guarantees.
9.
Obtain letter of representation from the management that contains
language regarding contingencies. |
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