Completing the audit and reporting: Know how to handle the following issues (Two Questions): Contingencies Attorney’s...

Completing the audit and reporting: Know how to handle the following issues (Two Questions):

Contingencies

Attorney’s Letters

Client Representation Letter

Subsequent Events

Expert Solution

Subsequent Event

A subsequent event is an event that has occurred after the end of Reporting period but before approval of financial statements by Owners and Auditor.

Events that need adjustments in the values of financial statements are required to be adjusted such as Insolvency of a debtor. Although Events are adjusting only if they provide any additional information about condition that existed on the balance sheet date.

Sometimes events are as such which may not provide additional information about conditions existing at balance sheet dates, but may required a disclosure in financial reports as it may be misleading is they are not reported. For example a decision to shut down a unit is taken after balance sheet date but will require disclosure in the reports so that Investor and other users of financial statements can take an Informed Decision.

Contingencies

A Contingency is a situation when an outcome whether favorable or unfavorable is uncertain.

Contingencies provide important information about company’s future. This is the reason why users of financial information are concerned about this information.

Contingencies must be disclosed in the financial statements which include any lawsuit against company, Expectation about changes Government policies, etc.

It is not possible to calculate exact amount of liability or asset that may arise if the uncertain event happens. Only a good estimate is calculated which is shown in financial statements as a note.

ekkarill92 answered 1 year ago

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