Contingent Liabilities of Chewy
This assignment is for a follow up post to the attached.
Management will typically have a conservative view on contingencies and be hesitant to report them in the financial statements. They may feel that the disclosure of contingencies could lower stock prices and lead to lawsuits. As an auditor, you should look for contingencies and make sure they are properly reported. The proper accrual or disclosure of contingencies supports transparent reporting and could reduce the possibility of lawsuits from investors and creditors by providing them with realistic expectations.
The procedures the auditors used to search for contingent liabilities are listed in the attached.
Do you agree with the procedure they have presented? Why or why not? What additional procedure could be performed? List the procedure, explain how it is performed, and discuss why it would be appropriate.
Response Post #Chewy
Student’s Name
College/University
Course
Professor’s Name
Due Date
I do not fully agree with the procedures for identifying contingent liabilities as presented for specific rationales. Contingent liabilities can be conceptualized as an existing situation, condition, or a combination of circumstances characterized by some degree of uncertainty as to potential loss for the company that ultimately would be resolved when some future event fails to happen or happens (Franklin et al., 2019). The auditing procedures used primarily evaluated Chewy’s Form 10-K, thus failing to capture other sources that could capture contingent liabilities. The auditors did not read the minutes of company board meetings, review contractual agreements (e.g., leases and loan agreements), review income tax liability, IRS agents’ reports, or tax returns, and confirm the documenting of guarantee