Audit Procedures for Liabilities

The auditor’s primary substantive procedures for liabilities typically include the following:

1. Reconciling general ledger and subsidiary ledger;

2. Performing purchase and accounts payable cut-off;
3. Confirming liabilities to debtors;
4. Inspecting supporting documents such as contracts, invoices, receiving reports, etc.;
5. Searching for unrecorded liabilities;
6. Testing the accuracy of interest expense, interest payable, amortization of discount and
premium;
7. Evaluating valuation of liabilities denominated in foreign currencies;
8. Reviewing compliance with terms of debt agreements;
9. Performing analytical review procedures to liabilities and related accounts; and
10. Evaluating proper financial statement presentation and adequacy of disclosure.