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Hi sir, for june 2012 exam, question 4(b) regarding food poisoning, the company lawyers said that the lawsuit is unlikely to be successful which means the payment is only POSSIBLE .
Therefore no provision is required, but contingent liability disclosures are required right sir?
Also, the purpose of
inspecting board minutes to understand whether the directors believe that the claim will be successful or not is actually to assess whether there is any evidence to support the customers’ claims of food poisoning .
Am i right sir ?
Could you explain why the following procedure is performed ? I dont understand sir . It’s part of the answer key .
– Review the post year end period to assess whether any payments have been made to any of the claimants
Why should the auditor perform this procedure ?
Ifnthe amounts are paid it will determine that the liability at year was actual, not just contingent and a provision is needed.
Okay sir, I got it. There’s another procedure
– inspecting board minutes to understand whether the directors believe that the claim will be successful or not
This is to ensure if the directors believe that the claim will be successful, then they should have provided for it at the year end . Am I right sir ?
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