Long-term liabilities

Question 1

Give an example of an audit procedure for completeness of Long-term Liabilities.

Answer 1

1. )Verify due dates for payments in the loan agreements
2. )Trace cash disbursements from the accounting records to the bank statement
3. )Examine canceled notes if paid in full.

Question 2

Identify a few audit procedures that address the existence assertion for long-term liabilities.

Answer 2

1. )Obtain copies of new loan agreements for the audit documentation.
2. )Verify authorization of new debt in minutes of meetings of those charged with governance.
3. )Trace the proceeds received from the accounting records to the bank statement.

Question 3

Identify a few audit procedures that address the valuation assertion for long-term liabilities.

Answer 3

1. )Trace related cash receipts (for increases) and disbursements (for decreases) from the accounting records to the bank statement for anydebt activities.
2. )Examine underlying loan documents for issuance of new debt and scheduled payments.
3. )Recalculate the amortization of any discount or premium involved.

Question 4

Identify an audit procedure that addresses the rights and obligations assertion for long-term liabilities.

Answer 4

1. )Review loan documents for any restrictive debt covenants to be disclosed.
2. )Review the loan documents (or inquire of management) to identify the current portion of long-term debt to be reclassified as a current liability.