One of the contingent liabilities that I found in the Boeing 2021 10-K filing
was for changes made to the severance liability. In 2020, Boeing recorded
over $650 million in severance costs due to employees expected to be let go
either voluntarily or involuntarily due to the economic uncertainty
surrounding the pandemic. The number of employees expected to be let go
was reduced from 26,000 to 23,000 and then to 19,000 over the course of
2021. These adjustments were combined with payments already made to
reduce the remaining expected payouts to just $11 million at the end of 2021.
This liability was not specifically noted in the financial statements but was
found in the “Liabilities, Commitments, and Contingencies” sections of the
notes. b
Two of the possible ways that auditors may use to search for liabilities like
this are “Reading the minutes of meetings of the board of directors,
committees of the board, and stockholders” and “Inspecting other documents
for possible guarantees or other similar arrangements.” (Messier et al., 2017)
When a company is planning for the possibility of letting upwards of 26,000
employees go, this decision would be discussed at length with all levels of
management and the board. Had it not been initially revealed to auditors,
indications of this decision would have been evident either in the minutes or in
other documentation that the auditors would have access to. If the auditors had
selected this route, they could have a list of keywords or phrases they would
be looking for within the minutes to determine if any further investigation
would be needed and what impact any major event or transaction would have.
If the planned layoffs and the severance recognition were found in the
minutes, auditors would review the company compensation and benefits plans
to determine if the severance packages were in line and being handled and
recorded appropriately.
References
Boeing. (2021). United States Securities And Exchange Commission Form 10-
K. Inline XBRL Viewer. Retrieved October 13, 2022, from
https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata%2F12927%2
F000001292722000010%2Fba-
20211231.htm#i96cbbb599c964cb4a125b720672b6568_286
Messier Jr., W. F., Glover, S. M., & Prawitt, D. F. (2017). Auditing &
assurance services: A systematic approach. In No Title (10th ed.). New York,
NY: McGraw-Hill Education.
