SAS No. 23 Auditing Contingencies


Revised by Auditing Standards Committee in Taiwan on 23 November, 1999.


The objective of auditing contingencies is to ensure those contingencies that have a significant impact to the fair presentation of the client’s financial statements have been properly accounted for in conformity with generally accepted accounting principles.

The audit procedures on contingencies normally include the following:

  • Review the description of service charges for legal and other professional fees.
  • Obtain from management a list of pending litigations.
  • 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.

  • Review tax returns assessed and tax payments made for all years and ensure whether there are any pending administrative appeals.
  • Review all minutes of board meetings, shareholders’ meetings, and other important meetings thru the end of the field work.
  • Review loan agreements, lease contracts, other major contracts and memoranda regarding guarantees and endorsements.
  • Inquire the management of any significant contingencies not yet disclosed.
  • Confirm with financial institutions for any discounted notes or guarantees.
  • Obtain letter of representation from the management that contains language regarding contingencies.

The auditor should issue qualified or adverse opinion if the client’s accounting for contingencies do not conform with generally accepted accounting principles.

The auditor should issue disclaimer of opinion if the client imposes scope restriction on auditing contingencies.  

The auditor may issue unqualified opinion if the client’s accounting for contingencies conform with generally accepted accounting principles. Whereas if the auditor wishes to emphasize the contingencies, the auditor shall issue a modified unqualified opinion.

Effective date

This Statement is effective for audit of financial statements with fiscal years ending on or after 31 December, 1999.

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