This module will discuss the audit of accounts payable, accrued liabilities and typical debt arrangements found in nonpublic entities. Contingencies, income taxes and more complex debt arrangements are covered in other modules. The audit of liabilities normally focuses on the timing of a purchase of an asset, recognition of expense or recording of a deposit to recognize accounts-accounts payable and accrued liabilities, GAAP requires that liabilities be recorded at the point of the passage of title to the goods or with the receipt of benefit from the performance of services. In the case of debt when the entity signs a loan or similar agreement and draws down funding a liability exists. In some cases, the entity may be obligated for fees and such even when funds have not been drawn. (Please Note: This module is part of Surgent's Audit Skills Training: Level 1.)
Learning Objectives
- Identify the accounting treatment for accounts payable, accrued liabilities and debt typically found in less complex private entities and not-for-profits (more complex debt is discussed in another module)
- Identify the internal controls responsive to accounts payable, accrued liabilities and debt
- Understand the risks involved in accounts payable, accrued liabilities and debt at the assertion level
- Tailor the audit plan in response to assessed risk of material misstatement
- Evaluate results from a search for unrecorded liabilities
- Assess the propriety of accrued estimates
- Evaluate debt covenant compliance
Major Topics
- Accounting basics for accounts payable, accrued expenses and debt
- Risk associated with accounts payable, accrued expenses and debt
- Key controls related to accounts payable, accrued expenses and debt
- Procedures commonly used to audit debt, including compliance with restrictive covenants
