What accounts are more Risker in audit of long term liabilities
There are a few specific accounts that are generally considered to be more risky in the audit of long-term liabilities:
1. Long-term debt: This includes bonds, loans, and other forms of debt that have a maturity date of longer than one year. These accounts can be risky because they often involve larger amounts of money and can have complex terms and conditions.
2. Pension and other post-employment benefit obligations: These liabilities represent the company's obligations to provide retirement benefits to its employees. They can be risky because they involve long time periods and complex calculations, such as determining expected future benefit payments and discount rates.
3. Warranty obligations: These liabilities represent the company's potential future costs related to warranties given on its products or services. They can be risky because they require judgment and estimation, including determining the likelihood of future warranty claims and estimating the associated costs.
4. Contingent liabilities: These are potential liabilities that may arise from past events and depend on uncertain future events. Examples include pending lawsuits or claims against the company. Contingent liabilities are risky because they are uncertain and may require significant judgment in determining their likelihood and potential financial impact.
5. Lease obligations: These liabilities represent the company's obligations under leasing arrangements, such as operating leases for buildings or equipment. They can be risky because they involve complex lease terms, potential hidden obligations, and calculations of present value.
It is important to note that the level of riskiness of these accounts can vary depending on the nature of the business and the specific circumstances of each company. Additionally, the auditor's assessment of risk factors may also influence the perceived riskiness of these accounts.