Define (a) contingent liabilities and (b) commitments and explain briefly why contingent liabilities and commitments may present problems for the auditor.

• A contingent liability refers to a potential liability depending on whether future events will occur or not.

• It happens when an outcome of a situation is uncertain and will only be solved by some future event

• The auditor has to ensure that these are recorded in the books of accounts.

• A commitment is the engagement in assuming a financial obligation on a future date.

• Since this is an intrinsic part of planning for expenditure, the auditor has to ensure that is in compliance with Financial Administration Act.