Audit of Liabilities

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 it 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 suppliers’ 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 suppliers’ statements of accounts with client records and investigate any
discrepancy.
- If suppliers do not respond with the requests, perform extended procedures, like:
a. Reviewing payments after year-end.
b. Checking supporting documents.
c. Discussing the account with appropriate officer.
3. Review correspondence with suppliers for possible adjustments.
4. Test propriety cutoff:
- Examine purchases recorded and suppliers’ deliveries made a week before and after the end
of the reporting period and ascertain whether the purchases were recorded in the proper
period.
- Investigate large amounts of purchases returned shortly after the end of the reporting
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 Non-Current 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 non-current liabilities are
identified.
6. Accuracy of interest and other charges related to non-current liabilities.
7. Propriety of financial statement presentation and adequacy of disclosures.