Prelim Period

Burauen Community College Modular Home Instruction

Third Year Professional Courses
Poblacion District 9, San Diego, Burauen, Leyte
Second Semester, SY 2021- 2022
__________________________________________________________________________________________________

Outcomes- Based Learning Modules in

AUDITING AND
ASSURANCE:
CONCEPTS AND
APPLICATIONS 2
(for internal use only of Burauen Community College)
 Prelim Period

Burauen Community College Modular Home Instruction

Third Year Professional Courses
Poblacion District 9, San Diego, Burauen, Leyte
Second Semester, SY 2021- 2022
__________________________________________________________________________________________________

Module 1
Audit of Liabilities
Learning outcome based on the syllabus:
LO1.

Learning Objectives:
At the end of the module, the following learning objectives will be attained by the students with at least 75% accuracy:
1.

Direct Instruction

AUDIT PROGRAM FOR ACCOUNTS PAYABLE

Audit Objectives:

To determine that:
1. Accounts payable represent amounts currently payable to trade creditors for purchases of goods and services as at the
end of the reporting period.
2. Accounts payable have been properly recorded.
3. Accounts payable are properly described and classified and adequate disclosures have been made.

Audit Procedures:
1. Obtain a list of accounts payable from the subsidiary ledger, and:
 Check its footing.
 Check if the list reconciles with the general ledger control account.
 Trace individual balances to the subsidiary ledger.
 Test accuracy of balances in the subsidiary ledger.
 Adjust non-trade accounts erroneously included in supplier’s accounts.
 Investigate and reclassify significant debit balances.
2. Confirm accuracy of individual balances appearing in the subsidiary ledger by requesting statements of accounts from
suppliers, and:

 Reconcile supplier’s statements of accounts with client records and investigate any discrepancy.
 If suppliers do not respond with the requests, perform extended procedures, like:
 Reviewing payments after -year-end.
 Checking supporting documents.
 Discussing the account with appropriate officer.
3. Review correspondence with suppliers for possible adjustments.
4. Test propriety of cutoff:
 Examine purchases recorded and supplier’s deliveries made a week before and after the end of the reporting
period and ascertain whether the purchase were recorded in the proper period.
5. Ascertain whether some payables are secured with asset pledges.
6. Compare payments after the reporting date with year-end schedule of accounts payable.
7. Review propriety of financial statement presentation and adequacy of disclosures.
8. Perform analytical review procedures.
9. Obtain accounts payable representation letter.

AUDIT PROGRAM FOR

 Prelim Period

Burauen Community College Modular Home Instruction

Third Year Professional Courses
Poblacion District 9, San Diego, Burauen, Leyte
Second Semester, SY 2021- 2022
__________________________________________________________________________________________________

NONCURRENT LIABILITIES

Audit Objectives:
To determine:
1. Authorization of liabilities incurred.
2. Validity of recorded liabilities.
3. Recognition and recording of significant liabilities.
4. Compliance with terms, restrictions, conditions, and other requirements of debt agreements.
5. Assets pledged or mortgaged and other guarantees related to noncurrent liabilities are identified.
6. Accuracy of interest and other charges related to noncurrent liabilities.
7. Propriety of financial statement presentation and adequacy disclosures.

Audit Procedures:
1. Obtain schedule/s of noncurrent liabilities, indicating:
As to general nature:
 Description or nature of the noncurrent liabilities.
 Creditor/s
 Original principal amount
 Interest rate
 Collateral and/or guarantees
 Terms, restrictions, conditions, and requirements imposed by the creditors.
As to principal amount outstanding:
 Beginning-of-the-year balance
 Additions during the year.
 Repayments or renewals during the year
 Balance at year-end
As to interest:
 Accrued or prepaid at the beginning of the year
 Amount incurred during the year
 Payments during the year
 Accrued or prepaid at year-end
2. Foot and cross-foot the schedule.
3. Verify accuracy of the schedule.
As to general nature:
 Obtain copies or excerpts of debt instruments and trace data to the schedule.
As to principal amount outstanding:
 Trace beginning balances to last year’s working papers, or in an initial audit, establish accuracy of beginning
balances by:
 Reference to debt instruments and prior year’s recordings
 Tracing to beginning ledger balances
 Trace proceeds to cash receipts records for new liabilities incurred in the current year.
 Trace payments to cash disbursements records and canceled checks.
 Vouch to supporting documents the renewals in the current year.
 Agree working paper ending balances with the general ledger accounts.
As to interest:
 Trace beginning balances to last year’s working papers, or in an initial audit:
 Establish an accuracy by an independent computation based on debt instruments.
 Trace to beginning ledger balances.
 Recompute the interest:
 Incurred
 Accrued
 Prelim Period

Burauen Community College Modular Home Instruction

Third Year Professional Courses
Poblacion District 9, San Diego, Burauen, Leyte
Second Semester, SY 2021- 2022
__________________________________________________________________________________________________

 Prepaid
 Trace payments to cash records and canceled checks.
4. Verify authorizations by reference to minutes of the board of directors’ meetings.
5. Confirm directly with the creditors or trustees the following:
 Principal amount still outstanding
 Interest rates
 Interest accrued
 Collateral and/or guarantees
6. Determine client’s compliance with loan agreements.
7. Account for the used and unused debt instruments like bond certificates and promissory notes.
8. Ascertain proper cancelation of paid or retired debt instruments.
9. Recompute the accuracy of any discount or premium amortization.
10. Reconcile interest payments with recorded liabilities.
11. Verify propriety of financial statement presentation and adequacy disclosures.

Learning Activities:

Activity 1. Knowledge Level Assessment

Directions: Solve auditing problems through application of auditing concepts.

Activity 2. Case Study/Analysis

Directions: Provide answers to given questions based on case facts provided.

References:

Roque, G. (2018). Auditing Problems 2018-2019 Edition (2018-2019 Edition). GIC Enterprises & Co., Inc