What is one procedure to test provisions?

Obtaining written representations regarding assumptions is a key procedure to test provisions because it allows auditors to gather direct evidence from management about the estimates and assumptions that underlie the provisions recognized in the financial statements. Provisions often involve significant judgment and estimation, such as future liabilities, contingent losses, or warranty obligations. Therefore, it is crucial for auditors to understand the basis of these judgments.

By obtaining written representations, the auditor can confirm whether management believes that the assumptions used in calculating the provisions are reasonable and consistent with the underlying facts and circumstances. This process serves as a form of verification that the information used to establish provisions is reliable, acknowledges potential uncertainties, and aligns with accounting standards.

The other choices pertain to testing different aspects of financial transactions or conditions but do not specifically address the evaluation of estimates and assumptions related to provisions. Inspecting contracts for salary adjustments, for instance, is not directly relevant to assessing provisions unless the provision itself is related to payroll. Similarly, reviewing bank statements for inventory purchases and tracing payments against supplier invoices are procedures that focus on transactional accuracy rather than on estimating future obligations or liabilities. Thus, obtaining written representations stands out as the most pertinent procedure for this context.