ACCA AA Syllabus D. Audit Evidence - Payables - Provisions - Notes ^{13 / 18}

Provisions Substantive Procedures

1. Get a list of provisions

2. Confirm in line with IAS 37 (obligation, probable, reliable measure)

3. Review changes in the provisions

4. Review the valuation and think of using an expert

5. Review for omissions based Knowledge of industry

6. Compare to P/Y

7. Look at correspondence with lawyers

Contingencies Substantive Procedures

• Understand the management approach to identifying contingencies

• Review board minutes

• Review business journals for industry wide contingencies

• Review legal correspondence and possible direct confirmation from them (letter from management but reply direct to auditor)

To recognise these potential assets - the company must be virtually certain.

Being probable is not enough - that will result in a disclosure only

Disclosures about contingent liabilities and contingent assets

• A brief description of the contingent liability/asset

• An estimate of its financial effect

• An indication of the uncertainties

• For contingent liabilities, the possibility of any reimbursement