ACCA Audit and Assurance (F8) Practice Exam

When auditing provisions and contingencies, which procedure is NOT commonly performed?

1. Review correspondence with lawyers

2. Discuss with suppliers

3. Obtain details of provisions

4. Recalculate to ensure accuracy

The correct answer is: Discuss with suppliers

When auditing provisions and contingencies, the primary focus is on understanding the financial implications and potential liabilities arising from uncertain events that might impact the financial statements. The correct choice indicates that discussing with suppliers is not a common auditing procedure for this specific area. The rationale behind this is that provisions and contingencies generally relate to estimations and uncertainties that arise from legal, regulatory, or contractual obligations rather than factors directly tied to the suppliers. An auditor typically investigates these areas by reviewing correspondence with lawyers, which helps assess the likelihood of potential future claims or obligations. Obtaining details of provisions is essential to ensure that the company adequately identifies and accounts for these liabilities. Additionally, recalculating provisions ensures that the estimated amounts are correctly measured, confirming the accuracy of reported figures. In contrast, discussions with suppliers would not yield relevant information regarding the company’s contingent liabilities or provisions that might arise from legal disputes or similar matters. This highlights why engaging suppliers in this context does not align with the standard auditing procedures for provisions and contingencies.