[Illustrative Checklist] for Verification of Liabilities to be Followed by the Auditor | Part-2

Being an important part of the auditing process, the verification of liabilities is crucial for ensuring the accuracy and reliability of an entity’s financial statements. Liabilities represent the obligations and debts owed by the entity, which can encompass various categories, such as loans, provisions, taxes, gratuity, contingent liabilities, and more. To properly assess these liabilities during an audit, auditors should engage illustrative checklist that helps guide their examination and evaluation. This checklist aims to ensure that the liabilities are appropriately recorded, measured, and disclosed in accordance with applicable accounting standards and regulatory requirements.

I. Has the auditor checked whether the term “contingent liabilities” has been defined and understood correctly

II. Whether the auditor has verified the distinction between contingent liabilities and actual liabilities, considering that contingent liabilities may or may not crystallize into actual liabilities and give rise to a loss or expense

III. Has the auditor checked if contingent liabilities have been distinguished from contingencies likely to result in a loss, which requires adjustments to relevant assets or liabilities

IV. Has the auditor examined instances such as lawsuits, disputes, and claims against the entity that are not acknowledged as debts, as well as the membership of a company limited by guarantee, as potential sources of contingent liabilities

V. Has the auditor reviewed the minutes of the meetings of the board of directors, committees of the board of directors, or any other similar body to verify contingent liabilities

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