Audit the liabilities of the balance sheet

A structured and methodical approach for auditing balance sheet accounts

 

Auditing an organization's annual accounts requires a structured and methodical approach. In this regard, there are professional standards, in particular on an international scale, intended to help auditors in carrying out their missions and to protect themselves in matters of liability. Indeed, the audit work is not without risk. The auditors certainly have no obligation of result, nor the task of "tracking down fraudsters". They nevertheless have duties, such as that of implementing appropriate techniques and tools to ensure the quality of the financial statements of the audited entity. The auditor must therefore proceed in order, distinguishing the elements making up the annual accounts, then focusing on each one and adapting their audit strategy accordingly.

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Control the completeness of debts on the balance sheet, a primary audit objective

 

Are the debts subscribed by the organization included in the balance sheet? Have the commitments given by the company been the subject of financial information? Have provision been made for probable outflows of resources without equivalent consideration? These are the essential questions to be asked by the auditor controlling the liabilities of the organization, each of these questions representing an auditors in Dubai objective in its own right even if all of them call for the same problem: the exhaustiveness of debts on the balance sheet. This is the main assertion to be verified by the audit. With regard to identifying, if necessary, unrecognized elements, the quality of the professional judgment of the auditor is essential.

 

Audit of balance sheet liability accounts and associated control objectives

The liability items to be audited and the related control objectives are as follows:

 

·         equity, the auditor ensuring that the movements recorded in terms of internal resources are justified by decisions taken by the owners of the entity at a general meeting;

 

·         provisions for risks and charges , the audit consisting in checking that the probable outflows of resources without equivalent counterpart have been the subject of a provision, or if this has been reversed taking into account the extinction of the risk;

 

·         financial debts , the auditor verifying that the balances on the balance sheet comply with all of the commitments and contractual terms signed by the organization, but also that the principle of separation of accounting years is respected in terms of financial charges (interest accrued but not yet due);

 

·         supplier debts , representative of purchases made but not settled at the end of the financial year, or even the receipt of goods or services over the period audited and not yet invoiced by the third parties concerned. The audit consists, among other things, of ensuring the necessary and sufficient character of the debts presented in the balance sheet, by also integrating into inventory control operations;

 

·         Fiscal and social debts, that is, what is owed by the organization to employees in terms of remuneration, to social organizations concerning social security contributions, to the tax authorities in matters of taxes and duties. Regarding this item, the auditors reconcile the items paid and declared to stakeholders with the accounting balances.

 

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