Lady Kate 2

Learning Team Assignment: Week 5 Learning Team Assignment

Purpose of Assignment

Prior to completing the audit, the auditor needs to identify any activity that might affect their reporting. Identification of contingent liabilities and subsequent events are key links between completing fieldwork and issuing the auditors’ report.

A contingent liability is a potential liability (e.g. damages to be paid for a pending lawsuit or a product warranty). For example, if the outcome of a lawsuit and/or amount to be paid in a lawsuit is unknown or unknowable, the company cannot or should not record the amount owed in a particular period in its financial statements. The company may be found not liable for the lawsuit. However, because there is the potential for damages payments, this information needs to be disclosed so the reader of the financial statements can factor that information into their analysis of the company. Likewise, use of warranties is often an unknown.

Consequently, how the company plans to account for these should be disclosed.

According to the AICPA, “An independent auditor's report ordinarily is issued in connection with historical financial statements that purport to present financial position at a stated date and results of operations and cash flows for a period ended on that date. However, events or transactions sometimes occur subsequent to the balance-sheet date, but prior to the issuance of the financial statements. This can have a material effect on the financial statements and therefore require adjustment or disclosure in the statements. These occurrences hereinafter are referred to as "subsequent events." (AU 560).

The purpose of this assignment is to give the student some experience in addressing two key steps an auditor goes through as they complete fieldwork and begin preparing for the reporting phase of the audit.

Grading Guide

Content	Met	Partially Met	Not Met	Comments:
Explains the importance of reviewing for contingent liabilities and subsequent events.
Describes the requirements for reviewing for contingent liabilities and subsequent events.
Presentation consists of 10 to 12-slides and is appropriate for the audience.
The presentation includes relevant media and visual aids that are consistent with the content.
		Total Available	Total Earned
		X	#/X
Presentation Guidelines	Met	Partially Met	Not Met	Comments:
The presentation is laid out with effective use of headings, font styles, font sizes, and white space.
Intellectual property is recognized with in-text citations and a reference slide.
The presentation includes an introduction and conclusion that preview and review major points.
Major points are stated clearly; are supported by specific details, examples, or analysis; and are organized logically.
Rules of grammar and usage are followed including spelling and punctuation.
		Total Available	Total Earned
		X	#/X
Assignment Total	#	X	#/X
Additional comments: