Non-current liabilities

Question 1

How to test existence?

Answer 1

1. Obtain direct confirmation from banks and other lenders of the amounts outstanding, accrued interest and what security they held

Question 2

How to test rights and obligations?

Answer 2

1. Review direct confirmation letters from lenders

Question 3

How to test completeness?

Answer 3

1. Obtain a breakdown of liabilities, compare to prior year audit working papers and for any items no longer included agree to:
   - Repayment amount in cash book
   - Inclusion as current liability if reclassified
2. Review board minutes for evidence of any new borrowings which might not be recorded
3. Review cash book to ensure all new loans have been recorded

Question 4

How to test accuracy, valuation and allocation?

Answer 4

1. Perform proof in total of finance charges
2. Agree capital and interest amounts to confirmation letters
3. Recalculate finance charges agreeing interest rates to loan agreements

Question 5

How to test classification and presentation?

Answer 5

1. Review draft accounts and agree that liabilities are correctly classified as current/ non current by reference to the repayment dates in the loan agreements
2. Ensure disclosures are correct and in line with accounting standards by comparing disclosure to required disclosure per an accounting disclosure checklist