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Hi sir, for june 2010 exam question 1(d)(ii),
The question states “Describe 3 procedures that the auditor should perform in confirming the completeness of provisions or contingent liabilities ”
Does this mean that they want only want us to state procedures that verify the “completeness” assertion ?
In that case, in the answer key, there are few procedures which tests the “existence” assertion such as
Discuss with management, the nature of the dispute between smoothbrush and the finance director to obtain a full understanding of the issue and to assess whether and obligation exists. This assertion tests the existence of provision, am i right ?
Then why is it included when they want procedures on completeness ?
You are right and the answer as written is testing existence, not completeness….except that discussion might reveal that the potential liability is wrong by being understated. The answer could be clearer.
okay sir. For this question, it’s stated that
” The company is not going to make any provision or disclosures for this, as they are confident that the claim has no merit”
so, I can actually include this same procedure below to verify whether the liability at the year end was actual therefore, and therefore a provision is needed.
– Review the post year end period to assess whether any payments have been made to to the former finance director
Am I right sir ?
Yes. Also if not paid you have to discuss the claim to judge possible/probable.
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