Which one of the following items would NOT be of concern to the auditor as a potential contingent liability? In each case, the event could generate a loss of $20 000.
A) Loans receivable discounted
B) Unused balances of outstanding letters of credit
C) Income tax disputes
D) Obsolete inventory

Question

Quizplus · Accepted Answer

The auditor would be concerned about loans receivable discounted, unused balances of outstanding letters of credit, and income tax disputes as potential contingent liabilities because they are all events that could generate a loss. However, obsolete inventory does not fall under the category of a contingent liability as it is a regular business risk and does not depend on any uncertain events.

Which One of the Following Items Would NOT Be of Concern