The completeness and proper classification of liabilities are the typical higher audit risks. The complexity of the debt financing arrangements may create a significant risk requiring special audit consideration. This module will discuss tips and techniques for auditing accounts payable, accrued expenses, and common long-term financing arrangements and related debt covenants.
Major Topics:
- Typical audit procedures related to accounts payable and accrued expenses, including the search for unrecorded liabilities
- Key controls related to liabilities
- Auditing long-term debt, including compliance with covenants
- Determining the proper classification of financing arrangements
- Proper form of noncompliance waiver letters
- Impact of noncompliance on disclosures
Prerequisites
No advanced preparation or prerequisites are required for this course.
Designed For: Accountants responsible for auditing accounts payable, accrued expenses and debt.
Learning Objective
- Discover and discuss typical audit risks and special audit considerations related to various liabilities.
- Recognize and tailor the audit plan in response to assessed risk of material misstatement, focusing on the assertions with typically higher risk.
- Explore and evaluate results from a search for unrecorded liabilities and procedures to assess the propriety of accrued estimates.
- Discover and evaluate the completeness, classification, and disclosure of financing arrangements – including debt covenant compliance.
Last updated/reviewed: March 13, 2024
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Jennifer Louis
CPA, President of Emergent Solutions Group LLC
INTRODUCTION AND OVERVIEW
- Learning Objectives and Introduction to Auditing Liabilities, Including Long-Term Debt 5:34
- Typical Audit Procedures 11:58
- Search for Unrecorded Liabilities 13:26
- Auditing Accrued Liabilities 9:44
- Loss Contingencies 5:25
- Key Controls and Overview of Debt Audit Procedures 12:52
- Due on Demand and Subjective Acceleration Causes 3:08
- ST Obligations Expected to be Refinanced 6:23
- Revolving Credit Arrangements 4:25
- Focus on Debt Modification, Extinguishments and Troubled Debt Restructurings 12:18
- Focus on Debt Covenants 15:47
CONTINUOUS PLAY
SUPPORTING MATERIAL
- Slides: Auditing Liabilities, Including Long-Term Debt PDF
- Auditing Liabilities, Including Long-Term Debt Glossary/ Index PDF
REVIEW AND TEST
- REVIEW QUESTIONS quiz
- FINAL EXAM exam
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