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    Isa 501

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    The document discusses the auditor's responsibilities regarding provisions and contingent liabilities when auditing financial statements. It covers obtaining evidence about inventory, litigation and claims, and segment information. It describes how the auditor should design procedures to identify litigation and claims that could materially misstate the financials, such as inquiring with management and legal counsel. It also discusses when the auditor needs to modify the audit opinion if unable to obtain sufficient evidence, such as if management refuses permission to communicate with legal counsel.

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    Isa 501

    Uploaded by

    cz82h7z84t
    71 views2 pages
    The document discusses the auditor's responsibilities regarding provisions and contingent liabilities when auditing financial statements. It covers obtaining evidence about inventory, litigation and claims, and segment information. It describes how the auditor should design procedures to identify litigation and claims that could materially misstate the financials, such as inquiring with management and legal counsel. It also discusses when the auditor needs to modify the audit opinion if unable to obtain sufficient evidence, such as if management refuses permission to communicate with legal counsel.

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    ISA 501

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    The document discusses the auditor's responsibilities regarding provisions and contingent liabilities when auditing financial statements. It covers obtaining evidence about inventory, litigation and claims, and segment information. It describes how the auditor should design procedures to identify litigation and claims that could materially misstate the financials, such as inquiring with management and legal counsel. It also discusses when the auditor needs to modify the audit opinion if unable to obtain sufficient evidence, such as if management refuses permission to communicate with legal counsel.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    71 views2 pages

    Isa 501

    Uploaded by

    cz82h7z84t
    The document discusses the auditor's responsibilities regarding provisions and contingent liabilities when auditing financial statements. It covers obtaining evidence about inventory, litigation and claims, and segment information. It describes how the auditor should design procedures to identify litigation and claims that could materially misstate the financials, such as inquiring with management and legal counsel. It also discusses when the auditor needs to modify the audit opinion if unable to obtain sufficient evidence, such as if management refuses permission to communicate with legal counsel.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    PROVISIONS AND CONTINGENT LIABILITIES (IAS 501)

    SCOPE
    This ISA deals with specific considerations by the auditor in obtaining sufficient
    appropriate audit evidence in accordance with ISA 3301, ISA 5002 and other relevant
    ISAs, with respect to certain aspects of inventory, litigation and claims involving the
    entity, and segment information in and audit of financial statements.
    OBJECTIVE
    3. The objective of the auditor is to obtain sufficient appropriate audit evidence
    regarding the:
    (a) Existence and condition of inventory.
    (b) Completeness of litigation and claims involving the entity; and
    (c) Presentation and disclosure of segments information in accordance with the
    applicable financial reporting framework.
    DEFINITIONS
    Contingent liability = a possible obligation arising from past events, the existence of
    which will be confirmed only by the occurrence or non-occurrence of an uncertain
    future event, not wholly owned by or within the control of the entity.
    Provision = Company has a present obligation as a result of past event; it is probable
    that an outflow of resources will be required to settle the obligation, lastly a reliable
    estimate can be made of the amount of the obligation.

    REQUIREMENTS
    Litigation and Claims
    9. The auditor shall design and perform audit procedures to identify litigation and
    claims involving the entity which may give rise to a risk of material misstatement,
    including: (A17 – A19)
    (a) Inquiry of management also maybe others within the entity, in-house legal
    counsel; and
    (b) Reviewing minutes of meeting of those charged with governance and
    correspondence between the entity and its external legal counsel; and
    (c) Reviewing legal expense accounts (A20)
    10. If the auditor assesses a risk of material misstatement regarding litigation or
    claims that have been identified, or when audit procedures performed indicate that

    1
    ISA 330, The Auditor’s Responses to Assessed Risks
    2
    ISA 500, Audit Evidence
    other material litigation or claims may exist, the auditor shall, in addition to the
    procedures required by other ISAs, seek direct communication with the entity’s
    external legal counsel, through a letter of inquiry prepared by management. (A21 –
    A25)
    11. If:
    (a) Management refuses to give the auditor permission to communicate or meet with
    the entity’s external legal counsel, or the external legal counsel refuses to respond
    appropriately to the letter of inquiry, or prohibited from responding; and
    (b) the auditor is unable to obtain sufficient appropriate audit evidence by performing
    alternative audit procedures,
    The auditor shall modify the opinion in the auditor's report in accordance with ISA
    705 (Revised).
    Written Representations
    12. The auditor shall request management to provide written representations that all
    known actual or possible litigation and claims whose effects should be considered
    when preparing financial statements have been disclosed to the auditor and
    accounted for and disclosed in accordance with the applicable reporting framework

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