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54 HASKINS & SELLS July Auditing Liabilities FOR some years text books on auditing emphasized the procedure incident to beginning an audit. That there was such a thing as ending an audit seemed to have been entirely overlooked. In similar manner the tendency seems always to stress the verification of assets. Volumes have been written on the subject. Instructions galore have detailed the procedure. But the important matter of auditing liabilities has received relatively little attention. We, therefore, reproduce certain suggestions which have been used and found helpful in covering the principal items under this head. All liabilities may be divided into three main classifications, and those subdivided further as follows: 1. DIRECT OR SPECIFIC: (a) Notes payable discounted at banks (b) Notes payable sold through brokers (c) Notes payable to individuals for loans (d) Notes payable and acceptances to trade creditors All of the above may be again classified as: Notes secured by collateral Notes unsecured (e) Accounts payable—trade creditors (f) Accounts payable—miscellaneous (g) Consignments (in) (h) Unclaimed wages (i) Unclaimed dividends (j) Deposits or prepayments on account (k) Judgments (l) Contracts (m) Mortgages (n) Bonds 2. CONTINGENT: (a) Notes receivable discounted (b) Acceptances (c) Endorsements (accommodation notes) (d) Guarantees (e) Unfulfilled contracts (f) The minute book 3. ACCRUING: (a) Pay roll (b) Taxes (c) Interest (d) Rent (e) Gas, electricity, water, heat, etc. (f) Freight (g) Commissions (h) Traveling expenses (i) Legal expenses (litigation in process) (j) Damages (k) Dues and miscellaneous accruals (l) Audit fees (m) Liability insurance DIRECT OR SPECIFIC: (a) Notes payable discounted at banks: There is greater possibility of deliberate deception being practised in connection with notes payable than in almost any other liability, and the greatest vigilance is necessary to be sure all are accounted for. Those payable at banks if at the regular banks of deposit are readily verified by certificate; the danger lies in the possible use of other banks and the use of the resulting funds without entry on the books. (b) Notes payable sold through brokers: The verification of these transactions is usually difficult owing to the inability to trace the paper further than to the brokers. However, the minutes should be examined
Object Description
Title |
Auditing liabilities |
Author |
Anonymous |
Subject |
Auditing |
Citation |
Haskins & Sells Bulletin, Vol. 05, no. 07 (1922 July 15), p. 54-55 Haskins & Sells Bulletin, Vol. 05, no. 08 (1922 August 15), p. 61-63 Haskins & Sells Bulletin, Vol. 05, no. 09 (1922 September 15), p. 68-69 |
Date-Issued | 1922 |
Source | Originally published by: Haskins & Sells |
Type | Text |
Collection | Deloitte Digital Collection |
Digital Publisher | University of Mississippi Libraries. Accounting Collection |
Date-Digitally Created | 2009 |
Identifier | HS Bulletin 5-p54 |