Johnson & Johnson’s 10-k report for contingent liabilities. Johnson & Johnson has multiple
pending lawsuits or other types of contingent liabilities. The company makes note of these in
their annual report in the Risk Factors section (Item 1A) as well as in the notes to the financials
(Note 19 Legal Proceedings). Johnson and Johnson notes that they do record accruals for
contingencies of legal matters when the liability is probable to be incurred and the amount can
be reasonably estimated.
Of the many lawsuits, the opioid litigation was the most notable to me. These lawsuits were
brought forth from multiple government agencies. These began around 2014 and it looks like
for the most part J&J have settled with each of the jurisdictions that brought the litigation.
Some procedures that can be undertaken to determine contingent liabilities in an audit are to
review the minutes of board of directors or shareholders meetings. It is highly likely upcoming
lawsuits would be discussed here. The auditor can also review loan agreements, leases,
correspondence from governmental agencies, and any contracts currently in place. IRS reports
or tax returns can also help identify contingent liabilities. Inquiring about the company’s policy
for handling contingent liabilities would also assist with this effort as well.
References:
Johnson & Johnson. (2022) Form 10-K 2022. U.S. Securities and Exchange Commission.
https://www.sec.gov/ix?doc=/Archives/edgar/data/200406/000020040622000022/jnj-
20220102.htm#i01be8f8f216a4c39adb513a606bfe937_55
Messier, W. Glover, S. Prawitt, D. (2019). Auditing & Assurance Services: A Systematic Approach
11th Edition. McGraw Hill Education.
