An auditor would be most likely to identify a contingent liability by obtaining a (an):

Question

Quizplus · Accepted Answer

Choice "C" is correct. An auditor would be most likely to identify a contingent liability by obtaining a standard bank confirmation, which has an "exceptions and comments" box that specifically discloses contingent liabilities as endorser of loans, for open letters of credit, etc. Choice "A" is incorrect. Confirmations of accounts payable relate to existing liabilities, not to contingent liabilities. They are not always performed and rarely disclose contingencies. Choice "B" is incorrect. Transfer agent confirmations relate to purchase and sale of securities. They are not always used and rarely disclose contingencies. Choice "D" is incorrect. Confirmations of related party transactions relate to transactions that have already occurred. They are not always used and rarely disclose contingencies.

An Auditor Would Be Most Likely to Identify a Contingent