Learn the best practices and key steps for auditing creditors, bills payable, loans, and debentures to ensure financial accuracy and compliance. Expert tips for auditors!
How Auditor Should Audit CREDITORS, BILLS PAYABLE, LOANS, DEBENTURES.
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CREDITORS
The auditor can demand for schedule of sundry creditors from the management. He should examine the individual balances in the subsidiary accounts and schedule.
ONFIRMATION FROM CREDITORS
The auditor can confirm the payable amounts from creditors He can examine the confirmed amount with books of accounts.
PURCHASE LEDGER
The auditor can also verify the purchase ledger and can determine the exact amount
PURCHASE BOOK
I he auditor can examine the purchase book He can compare the bills with the entries of purchases. In this way he can determine the true position.
RETURN OUTWARD BOOK
The auditor can also examine the return outward book. ‘ Such book is very useful for him to verify the goods returned to supplier
OVERDUE BALANCE
The auditor can also examine the overdue balance of any creditor He can ask to management to explain the reason of overdue balance. He can also confirm the reason from concerned creditors. »
2.BILLS PAYABLE
The auditor can demand for bills payable schedule from the management. He should examine this schedule.
CONFIRMATION
The auditor can also confirm the amounts of bills payable from different sources.
BILLS PAYABLE BOOK
The auditor can examine the bills payable book In this book, he can check the total bills accepted, bills paid and unpaid bills.
BILLS PAID
The auditor should calculate the total amount of bills paid. For this purpose he can examine the cash book entries
RENEWAL
The auditor should check the reason of the renewal * of bill.
UNPAID BILLS
The auditor must note that bills which are unpaid during the year are stated in Balance Sheet He can also examine the bills payaole book.
3. LOANS
BORROWING POWER
The auditor should examine the legal documents of the company to find out the borrowing powers of the firm.
RESOLUTION
The auditor should check the resolution of directors of the company for obtaining the loan
CONFIRMATION
The auditor can confirm the amount of loan from the lenders.
INTEREST
The auditor should also examine the interest paid, interest payable and rate of interest.
SECURITY
The auditor can verify assets given as security for obtaining the loan
AGREEMENT
The auditor can examine the agreement of loan with lenders. He should examine the loan documents in details.
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DEBENTURES
The auditor can demand for schedule of debentures from the management. He can examine the interest rate, maturity time, debentures issued and repaid.
DEBENTURES ISSUED
The auditor can examine the cash book and debenture holders registers for finding out the total debentures.
DEBENTURES REPAID
The auditor can also examine *he cash book and debenture holder register to sec :hat debentures are repaid c ^cording to the terms.
- CONFIRMATION
The auditor can also get the information from debenture holders about outstanding debentures. This.
confirmation may be useful for auditor in verifying the accuracy of books.
- MANAGEMENT POWER
The auditor can examine the memorandum and articles of association to know the borrowing power of * directors. The collected amount through the sale of debentures must be in the powers of management.
Conclusion
In conclusion, auditing creditors, bills payable, loans, and debentures is a critical aspect of ensuring the accuracy and reliability of a company’s financial statements. By following best practices, conducting thorough reviews, and paying attention to key details, auditors can help protect the company’s assets, mitigate risks, and enhance stakeholder trust