ap 55 accrued liabilities

8/10/2019 AP 55 Accrued Liabilities

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Form AP 55

Index Reference__________

Audit Program for Accrued Liabilities

Legal Company Name Client:

Balance Sheet Date:

Instructions: The auditor should refer to the audit planning documentation to gain

an understanding of the financial reporting system and the planned extent of testing

for accrued liabilities. Modification to the auditing procedures listed below may be

necessary in order to achieve the audit objectives.

All audit work should be documented in attached working papers, with appropriate

references noted in the right column below.

Audit Objectives Financial Statement

Assertions

Accrued liabilities reflected in the balance sheet

include costs and expenses authorized, incurred, andfor which benefit has been received as of the balance-

sheet date.

Completeness

Existence or occurrence

Rights and obligations

The basis and method of accrual are reasonable and

consistent with the prior period.Valuation or allocation

Accrued liabilities are properly classified in the

balance sheet and adequate disclosures made in

accordance with IAS.

Presentation and disclosure

PerformedBy

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1. Perform analytical review procedures as follows:

a. Compare current-period liability amounts to prior-period balances and investigate unusual fluctuations.

b. Compare actual amounts to budgeted amounts.


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c. Review general ledger account activity and investigate

any entries that appear unusual.

2. Perform the following procedures regarding accruedpayroll:

a. Compare amounts accrued as of the balance-sheet date

to subsequent payments made.

b. Trace amounts accrued in payroll records as of thebalance-sheet date to amounts recorded in the general

ledger.

c. Compare wages and payroll taxes per the payroll tax

returns to the general ledger.

d. Review compensation agreements for potentialadditional liabilities.

3. If the accumulated but unused annual leave is material tothe overall financial statements, perform the following

procedures:

a. Examine client policy, personnel manuals, or othersupporting documentation (e.g., union contracts) to

determine the related policies.

b. On a test basis, recompute the clients calculation ofaccumulated but unused annual leave and determine

overall reasonableness of the accrual recorded as of

the balance-sheet date.

4. If amounts owed to employees for other benefits (use offlats, vehicles, etc.) is material to the overall financial

statements, perform the following:

a. Obtain from the client and review a copy of the

agreement that specifies the nature, amount and timing

of benefits that the employee will receive.

b. On a test basis, recompute the clients calculation ofother benefits owed to employees and determine the

overall reasonableness of the accrual recorded as of

the balance sheet date.


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5. If deferred income and other deferred credits are material

to the overall financial statements, perform the followingprocedures:

a. Obtain an understanding of the nature of the account

and the clients policy and method of accounting.

b. Test computations of the current year activity (i.e.,additions and reductions) by examining supporting

documents or by applying analytical procedures to

related revenue and expense accounts.

c. Determine if the method of amortization is consistentwith the prior year.

d. Determine if the deferred credit balance at the balance-

sheet date is reasonable.

6. Perform the following procedures regarding income taxes

payable:a. Obtain or prepare a schedule reconciling pretax

accounting income to taxable income, identifyingseparately:

Permanent differences

Timing differences originating and/or reversing

during the year.

b. Recompute the clients calculation of income taxcurrently payable, using the current tax rate times the

amount of taxable income determined in the schedule

obtained in step (a) and compare to the clients taxstatement. Confirm current tax payable with the tax

office.

c. Obtain or prepare a schedule calculating the taxprovision for the year (income taxes currently payable

+ required adjustments to the deferred tax account) in

accordance with IAS 12.

7. For liabilities denominated in a foreign currency, verify

that related Mongolian taxes (required to be paid when a


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liability is settled in a foreign currency) have also been

accrued.

8. If the auditor is concerned about the risk of fraud, audit

procedures such as the following should be considered inaddition to the ones listed above:

a. Search for large or abnormal year-end adjustments.

b. Confirm accrued liabilities with outside third parties.

c. Perform detail analyses of expense accruals and trace

and vouch activity in the account.

d. Analyze historical trends in accruals and related

expense accounts.

e. For payroll, perform the following:

(1) Observe payroll distributions.

(2) Scrutinize payroll records for employees with little

or no deductions from their payroll.

(3) Review personnel files for compensation rates.

(4) Test payroll calculations and deductions.

(5) Confirm amounts paid to employees who are at

remote locations working without direct

supervision.

(6) Examine payroll disbursements subsequent to

year-end and compare with accrued payroll at thebalance-sheet date.

(7) Scrutinize the payroll registers for unusual items

such as: names of former employees; duplicate

names, duplicate addresses; unusual pay rates;

unusual number of hours worked; for two differentpeople.


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10. If other accrued liabilities are material to the overall

financial statements, perform the following:

a. Review the clients calculation of the accrual anddetermine the reasonableness of basis, method, and

amount of accrual.

b. Compare accrual amount to payments made

subsequent to the balance-sheet date, if applicable, for

reasonableness.

c. Reconcile amounts accrued in the current period to therelated expense general ledger control account.

11. Based on the results of the search for unrecordedliabilities, determine if any additional accruals should bemade as of the balance-sheet date.

Based on the procedures performed and the results obtained, it is my opinion that theobjectives listed in this audit program have been achieved.

Performed by Date

Reviewed and approved by Date

Conclusions:

Comments:

ap 55 accrued liabilities

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