When dealing with contingencies,
A) all contingencies must be disclosed or footnoted.
B) the auditor must exercise considerable professional judgment when evaluating whether the client has applied the appropriate treatment.
C) it is easy for the auditor to uncover contingencies without management's cooperation.
D) the review for contingent liabilities is only performed at the beginning and the end of the audit.

Question

Quizplus · Accepted Answer

Contingencies require significant professional judgment to evaluate and determine the appropriate treatment. The auditor should consider the likelihood of the contingency, the potential impact on the financial statements, and management's handling of the contingency. All contingencies must be assessed throughout the audit, not just at the beginning and end. While disclosure or footnotes may be necessary, it is not the only option for handling contingencies. It is also not easy for the auditor to uncover contingencies without management's cooperation.

When Dealing with Contingencies