[Checklist] | Audit of Loans, Borrowings, and Trade Creditors
- Account & Audit|Blog|News|
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- 2 Min Read
- By Taxmann
- Last Updated on 16 May, 2022
Liabilities are the financial obligations of an enterprise other than owners’ funds. It includes loans and borrowings, trade creditors and other current liabilities, deferred payment credits, installments payable under hire purchase agreements, and provisions.
The audit of liabilities is primarily directed at ensuring that all known liabilities have been properly accounted for since material omission or misstatement of liabilities vitiates the true and fair view of the financial statements.
One may adopt the following checklist for Audit of Loans, Borrowings, and Trade Creditors:
1. Whether the following aspects of internal control relating to loans and borrowings properly reviewed?
a) the borrowing powers and limits;
b) persons authorized and competent to borrow;
c) terms of borrowings;
d) procedure for ensuring compliance with relevant legal requirements/internal regulations
e) Any variations in the terms of loans and borrowings are truly approved/ratified in writing by the competent authority
f) Security offered against loans and borrowings is properly recorded and periodically reviewed
g) The records and documents are kept in proper custody and reviewed periodically
h) The system brings out all cases of non-compliance with terms and conditions including amounts of principal and/or interest that have become overdue
i) Confirmation of balances is obtained at periodic intervals and the discrepancies, if any, are duly investigated and reconciled
j) There is a proper procedure for year-end valuation of loans and borrowings, especially for those designated in foreign currencies
2. Whether the loans obtained within the borrowing powers of the entity?
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