This Guidance Note contains recommended audit procedures in case of audit of liabilities. The following is an outline of the relevant areas discussed in the Guidance Note:
- Internal Control Evaluation in Respect of Loans and Borrowings: credit limits/ borrowing powers and limits, authority, terms of borrowing, compliance with statutory requirements, variation in terms, security against loans, documentation, reporting of non compliance, balance confirmations, foreign exchange loans.
- Internal Control Evaluation in Respect of Trade Creditors, Current Liabilities, Provisions, Trade Deposits: in addition to those above, payment on duplicate invoices, schedule of creditors, adjustments to creditors, accounts to be authorised, cut off procedures.
- Examination of Records of Loans and Borrowings: validity and accuracy, agreement with the statements from creditors and loanees, loan agreements, change in the value of security, deferred payment credits.
- Examination of Records of Trade Creditors and Other Current Liabilities: cut off procedures, control accounts, documentary evidence, important aspects to be seen in the schedule of creditors etc., year end transactions, subsequent events.
- Examination of Records of Provisions: meaning of provision, objectives of audit of provisions, provision for taxes and duties, provision for gratuity, provision for bonus, provision for dividend, other provisions.
- Examination of Records of Contingent Liabilities: meaning, general procedures for verifying contingencies.
- Direct Confirmation Procedures: meaning, types – negative/ positive, suitability of each type, discrepancies in books of account vis a vis confirmations.
- Examination of Disclosures
- Analytical Review Procedures: comparison of various ratios
- Special Considerations in Case of a Company: compliance with the relevant sections of the Companies Act, 1956.
- Management Representations
- Documentation
|
| The Guidance Note also contains illustrative letter of confirmation to be sent to creditors and management representation letter for liabilities and contingencies. |
Issued in December, 1995
Published in the Handbook of Auditing Pronouncements, Vol. II (Edn. 2005).
Also available as a separate publication of the Institute (price: Rs. 15/-)
ISBN: 81-85868-81-6. | | |
