Decided to delve into Walmart's contingencies. The company details
in its 10KK that "the Company has made accruals concerning these
matters, where appropriate, which are reflected in the company's
consolidated financial statements." The details for these legal
proceedings are as follows; Asad stores, limited, "a wholly owned
subsidiary of the Company," is involved in an equal values lawsuit
beginning in 2008 that was brought before an Employment Tribunal
in Manchester. This legal issue arose in the UK concerning present
and former store employees. These individuals claim that the work
performed by the employees in the Asada retail store is equal to the
jobs performed by employees working in the warehouse and
distribution facilities; however, there is a disparity in pay. They claim
that this disparity stems from gender inequality. The difference in
pay between these positions impacts women because more women
work in retail stores while more men work in warehouses and
distribution centers. The difference in pay is not objectively justified.
The claimants are "requesting differential back pay based on higher
wage rates in the warehouse and distribution facilities and higher
wage rates on a prospective basis."
b It was ruled in October 2016 that the employment tribunal
decided claimants could compare their positions in retail stores to
those in warehouses and distribution centers. The ruling was
appealed and scheduled to be heard by the UK Supreme Court in July
2020. Currently, "the company cannot predict the number of such
claims that may be filed, and cannot reasonably estimate any loss or
range of loss that may arise from these proceedings. Accordingly, the
company cannot assure as to the scope and outcomes of these
matters and no assurance as to whether its business, financial
position, operating results or cash flow will not be materially
adversely affected." b
b A procedure that auditors might use the search for contingencies
such as the one presented above would be by "examining documents
in the entities records such as correspondence and invoices from
attorneys for pending or threatened lawsuits. Even though the
amounts of the legal expense account may be immaterial, the auditor
normally examines the transactions on the account. This examination
aims to identify actual or potential litigation against the entity. The
account analysis can also be used to develop a list of attorneys who
the entity has consulted." as well as requesting that the attorney
describe and evaluate each pending or threatening litigation, this
could include the progress on the case, additional actions the entity
plans to take and the likelihood of favorable or unfavorable outcome
the potential amount of loss. This would give the auditor a clearer
picture and understanding of what may or may not be material to the
financial statements to present the most accurate information for
shareholders and investors.
References
Messier, W. Glover, S. Prawitt, D. (2019). Auditing & Assurance
Services: A Systematic Approach 11th Edition. McGraw Hill
Education.
Wamart Inc. SEC Filing 10-K for fiscal year ended January 31, 2020.
Retreived from
sec.gov/Archives/edgar/data/104169/0000104169200000011/wm
tform10-kx1312020.htm
