Which action assesses the reasonableness of provisions?

Reviewing post year-end payments made on provisions is a crucial action in assessing the reasonableness of provisions because it provides insight into the appropriateness of the estimates made by management. Provisions are typically based on management’s assessment of future obligations, and examining any payments made after the reporting date helps to validate those estimates, showing how well the provisions align with actual cash outflows.

When payments are made after the reporting period, they may indicate that the original provision was either an overestimate or an underestimate. For instance, if significant payments are made that exceed the provisions set aside, it might signal that the initial estimation was not adequate. Conversely, if the payments are much lower than the provision, it could suggest that the provision was overstated. Analyzing such payments is directly aligned with assessing the reasonableness of the provisions and ensuring that they accurately reflect the entity's obligations.

Other actions, such as inspecting contracts for inventory purchases or obtaining confirmations of loan repayments, do not directly relate to assessing provisions but rather target other areas of financial obligations. Similarly, reviewing supplier payment history may provide context regarding expenses but doesn’t specifically validate the estimations related to provisions. Thus, focusing on post year-end payments gives the most pertinent evidence to assess the accuracy