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Chapter 8 3 4

Provisions

IAS 37 Provisions, Contingent Liabilities and Contingent Assets
requires an entity to recognise a provision if: a present obligation has
arisen as a result of a past event; payment is probable ('more likely than
not'); and the amount can be estimated reliably. If payment is only
possible, a contingent liability must be disclosed in the notes to the
financial statements.

10.1 Key assertions

 Completeness

 Rights and obligations

10.2 Sources of evidence

 Board minutes

 Enquiry with management

 Written representation

 Cash book / bank statements

10.3 Key areas to consider

 Existence of obligation at year-end

 Probability of payment

 Basis of provision

 Scope for manipulation

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