24-26 Elizabeth Johnson, CPA, has completed the audit of notes payable and other liabilities for Valley River Electrical Services and now plans to audit contingent liabilities and commitments.

Required

a. Distinguish between contingent liabilities and commitments and explain why both are important in an audit.

b. Describe how Johnsons testing in phases I-III of the audit of notes payable might help her obtain evidence about the four presentation and disclosure objectives.

c. Identify three useful audit procedures for uncovering contingent liabilities that Johnson will likely perform in the normal conduct of the audit, even if she had no responsibility for uncovering contingencies.

d. Identify three other procedures Johnson is likely to perform specifically for the purpose of identifying undisclosed contingencies.