A search for unrecorded liabilites is to check for the completeness of the information disclosed by management / balances disclosed on the management account. However, the work is always the trickiest and toughest. A substantial amount of informations are required to fulfill the audit's satisfactory level.
How can we ensure completeness of contingent liabilities?
- Inquire with management on the status of the on-going project, analyzed the circumstances and identify potential commitments and contingencies which might have been made by managment, but not disclosed.
- Sending bank confirmation to obtain external evidence on potential bills payable, letter of credit, etc.
- Examine all the agreements of the Company to identify potential liabilities, such as: corporate guarantee given to bank for guarantee over subsidiaries' loan.
- Examine minutes & resolutions to identify on-going activities which might require commitments and contingencies