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					                     Execution Phase –
               Sample Audit Programs
Liabilities – Liabilities Against Assets
                                                                                          Execution Phase –
                                                                                    Sample Audit Programs
                                                                     Liabilities – Liabilities Against Assets


Audit Program                                                          WP Ref.:
                                                                       Prepared by:
                                                                       Date:
(h)      Long Term Debt
                                                                       Reviewed by
                                                                       Date
Client:
Period:
Subject:     Long Term Debt

                                                                                           Amount in Rs.
Account balances:
Long term debt




Classes of transactions:




S. No.     Audit Objectives                               Assertions               Risk Assessment
                                                                              IR       CR         ROSM
           All long term debts on the balance sheet
           represent valid claims by banks or other   Existence, Rights
           third parties.                             & Obligations

           To ensure that all goods and services
           received by the entity have been
           accounted for in the books of the
           company on a timely basis.                 Completeness

           To ensure that liability is recorded at the
           correct amount.                             Valuation

           To ensure that long term debts have
           been presented, classified and disclosed
           in the financial statements in
           accordance with the requirements of
           applicable financial reporting
           framework i.e. Companies Ordinance,
           1984 and applicable International          Presentation &
           Financial Reporting Standards.             Disclosure
                                                                                         Execution Phase –
                                                                                   Sample Audit Programs
                                                                    Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                     Done by          W. P. Ref.

Analytical Procedures

         1.   Compare current year balances with prior year and
              ensure reasonableness of changes during the year.

         2.   Enquire into and obtain explanations for any unusual
              changes during the year.

Test of Details

1.       CONFIRM DEBT

         A. Obtain a schedule of notes payable and long-term debt
            (including debt outstanding at the end of the prior year,
            as well as any new debt) showing beginning and ending
            balances and borrowings and repayments during the
            year, and perform the following:

              1.   To obtain assurance about the completeness of the
                   schedule:

                   1.1 Make inquiries of knowledgeable
                       management.

                   1.2 Consider any evidence of additional debt
                       obtained through examination of minutes of
                       the board, significant contracts, confirmations
                       of bank accounts, support for subsequent cash
                       disbursements (when testing payables), and
                       other documents.

              2.   Test the summarization and trace the ending
                   balances to the general ledger.

         B.   For each lender (or, in some circumstances, selected
              lenders) with which the client had debt outstanding at
              the prior year end or during the current year, prepare, or
              have the client prepare, a confirmation request for the
              amount(s) owed to the lender, and perform the
              following:
                                                                                         Execution Phase –
                                                                                   Sample Audit Programs
                                                                    Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                     Done by          W. P. Ref.

              1.   Ascertain that the confirmation asks for all
                   information likely to be relevant to our tests of debt
                   and related interest balances (e.g., applicable
                   interest rates, due dates, the date to which interest
                   has been paid, collateral and security interests).

              2.   Mail the requests under our control to a person
                   within the lending institution who would be
                   expected to be knowledgeable about the client's
                   obligations, including any contingent liabilities,
                   guarantees, letters of credit, security agreements, or
                   similar matters with which the lender may be
                   involved.

              3.   Send second requests for non-replies.

              4.   Compare replies to requests. Prepare, or have the
                   client prepare, reconciliations of exceptions. Trace
                   reconciling items to supporting documents.

2.       TEST ACCRUED INTEREST


         A. Obtain a schedule of accrued interest expense (which
            may be prepared in connection with the schedule of debt
            in Procedure 1 above). Test the summarization and trace
            the total or the individual amounts, as applicable, to the
            general ledger.

         B.   Make a selection of debt instruments tested in Procedure
              1 and, for each item selected, perform the following:

              1.   Based on the information in the confirmation
                   concerning the date through which interest was
                   paid and the applicable interest rate, re-compute the
                   amount of accrued interest.

              2.   If the information needed to re-compute the amount
                   was not confirmed:

                   2.1 Examine the debt agreement evidencing the
                       interest rate.
                                                                   Execution Phase –
                                                             Sample Audit Programs
                                              Liabilities – Liabilities Against Assets

2.2 Obtain and examine cash disbursement
    records (usually the paid check) evidencing
    the most recent payment of interest.
                                                                                           Execution Phase –
                                                                                     Sample Audit Programs
                                                                      Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                       Done by          W. P. Ref.

                   2.3 Re-compute the amount of accrued interest.

         C.   Evaluate results of the tests.

3.       TEST INTEREST EXPENSE


         A. Calculate overall interest expense on loans for the year,
            and compare with recorded interest expense.

4.       TEST VALUATION AND PRESENTATION OF DEBT
         AND INTEREST ACCOUNTS

         A. Determine that the following items, if any, are properly
            recorded, classified, and/or disclosed, as appropriate:

              1.   Debt owed to related parties.

              2.   Long-term debt and current portion of long-term
                   debt.

              3.   Debt callable by the creditor (e.g., due to loan
                   covenant violations).

              4.   Short-term obligations expected to be refinanced.

              5.   Capitalized interest (e.g., related to construction
                   financing).

              6.   Imputed interest (e.g., when there is no stated
                   interest rate).

              7.   Discounts or premiums and related amortization.

              8.   Unconditional purchase obligations.

         B.   Obtain a schedule(s) of amounts due to be repaid in the
              next five years under the terms of long-term debt
              agreements (including, separately, amounts due under
              capitalized leases and/or unconditional purchase
              obligations, if any). Test the summarization of the
              schedule and re-compute (possibly on test basis) the
              amounts.
                                                                                         Execution Phase –
                                                                                   Sample Audit Programs
                                                                    Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                     Done by          W. P. Ref.

         C.   Read the provisions in loan and debt agreements (and
              update descriptions thereof contained in our permanent
              files, if applicable) and perform the following:

              1.   Test that the client is in compliance with loan
                   covenants and other significant provisions of the
                   agreements.

              2.   If there are any provisions with which the client is
                   not in compliance, determine whether the debt
                   should be classified as current. If enforcement of
                   the provisions has been waived by the lender,
                   obtain confirmation of the waiver from the lender.

         D. Determine that the accounting policies and methods of
            recording debt are appropriate and applied consistently.

5.       ROLLFORWARD TEST FOR DEBT TESTED PRIOR
         TO YEAR END

         A. Inquire, and consider any other evidence that comes to
            our attention (e.g., in reading the minutes of the board),
            as to the existence of any new debt agreements, or
            modifications to existing agreements, in the intervening
            period from the interim testing date to the balance-sheet
            date. Test any new debt (and related accrued interest) as
            in Procedures 1 through 4 of this Program.

              1.   Evaluate results of the tests.

         B.   Inquire, and consider any other evidence that comes to
              our attention (e.g., in reading the minutes of the Board),
              as to the existence of any new debt agreements, or
              modifications to existing agreements, in the intervening
              period from the interim testing date to the balance-sheet
              date. Test any new debt (and related accrued interest) as
              in Procedures 1 through 4 of this Program.

         C.   Test transactions during the intervening period between
              the interim testing date and year end:
                                                                                         Execution Phase –
                                                                                   Sample Audit Programs
                                                                    Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                     Done by          W. P. Ref.

              1.   Obtain reconciliations of the interim debt balances
                   to the year-end balances:

                    1.1 Agree new borrowings to cash receipts
                        journals or to entries in cash accounts.

                    1.2 Agree payments to cash disbursements
                        journals or to entries in cash accounts.

                    1.3 Examine supporting documents to verify other
                        significant entries.

              2.   Make a selection of entries in cash disbursement
                   journals (or those entries recorded directly in cash
                   accounts that represent debt payments):

                   2.1 Determine that the amounts of the payments
                       are in accordance with the terms of the debt
                       agreements (e.g., by re-computing the
                       payments).

                   2.2 Examine related paid checks or bank advices
                       (for wire transfers) for evidence of receipt and
                       deposit by the authorized payee (i.e. the
                       lender).

              3.   Evaluate results of the tests.

6.       CLIENT SERVICE CONSIDERATIONS


         Consider whether we can make useful recommendations to
         the client with respect to any of the following:

         A. When debt is retired, the client ensures that a discharge
            is received on assets securing the debt.

7.       TEST BALANCES DENOMINATED IN FOREIGN
         CURRENCIES

         A. Agree the closing exchange rate(s) used to published
            records and test the translation calculations.
                                                                                          Execution Phase –
                                                                                    Sample Audit Programs
                                                                     Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                      Done by          W. P. Ref.

8.       TEST PRESENTATION OF RELATED-PARTY
         BALANCES

         A. Inquire and consider available evidence, if any, to
            identify all related parties. Obtain a schedule of related-
            party balances and determine that all identified related
            parties with balances at year end are included in the
            schedule. Trace the amounts in the schedule to the trial
            balance.

         B.   Determine that the economic substance of the related-
              party balances supports their recording.

         C.   Evaluate the reasonableness of presentation and/or
              footnote disclosures of related-party balances.

         D. Consider requesting positive confirmation of material
            balances with related parties.

9.       TEST UNUSUAL ENTRIES RECORDED TO THE
         GENERAL LEDGER

         A. Investigate journal entries from sources that are typically
            not associated with this account.

              1.   When selecting items to be tested, consider (a) our
                   assessment of the risk of material misstatement due
                   to fraud, (b) the effectiveness of controls over the
                   preparation and posting of journal entries, (c) the
                   entity's financial reporting process and the nature of
                   the evidence that can be examined, (d) the nature
                   and complexity of the accounts, and (e) the amount
                   and number of such entries. Because fraudulent
                   journal entries often are made at the end of a
                   reporting period, our testing ordinarily should focus
                   on the journal entries and other adjustments made
                   at that time. In addition, because material
                   misstatements in financial statements due to fraud
                   can occur throughout the period and may involve
                   extensive efforts to conceal entries at the end of the
                   reporting period, we should consider whether there
                   also is a need to extend the testing of journal entries
                   to other periods within the period under audit.
                                                                                         Execution Phase –
                                                                                   Sample Audit Programs
                                                                    Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                     Done by          W. P. Ref.

         B.   Examine related accounting records and determine
              whether the selected debit/credit is valid, appropriate,
              and authorized. Determine whether the selected entry
              was properly recorded in the correct period and consider
              the possible implications of such journal entries on
              internal control.

         C.   Determine whether the entries exhibit characteristics of
              inappropriate or unauthorized journal entries such as (a)
              entries made to unrelated, unusual, or seldom-used
              accounts or business segments, (b) entries recorded at
              the end of the period or as post-closing entries that have
              little or no explanation or description, (c) entries made
              either before or during the preparation of the financial
              statements that do not have account numbers, and (d)
              entries that contain round numbers or a consistent
              ending number.

         D. Evaluate the reasonableness of other adjustments (e.g.,
            entries posted directly to financial statement drafts,
            consolidating adjustments, report combinations, and
            reclassifications) made in the preparation of the financial
            statements.

10.      EVALUATE BUSINESS RATIONALE FOR
         SIGNIFICANT UNUSUAL TRANSACTIONS

         A. If we become aware of significant transactions that are
            outside the normal course of business or that otherwise
            appear to be unusual given our understanding of the
            entity and its environment, perform the following
            procedures:

         B.   If we become aware of significant transactions that are
              outside the normal course of business or that otherwise
              appear to be unusual given our understanding of the
              entity and its environment, perform the following
              procedures:

              1.   Gain an understanding of the business rationale for
                   such significant unusual transaction.
                                                                                        Execution Phase –
                                                                                  Sample Audit Programs
                                                                   Liabilities – Liabilities Against Assets



S. No.   Audit Procedures                                                    Done by          W. P. Ref.

             2.   Consider whether the transactions involve
                  previously unidentified related parties or parties
                  that do not have the substance or the financial
                  strength to support the transaction without
                  assistance from the entity we are auditing.

             3.   Determine whether that rationale (or the lack
                  thereof) suggests that the transactions may have
                  been entered into to engage in fraudulent financial
                  reporting.

				
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