Audit Program Liabilities Against Assets

Audit Program (g)        Liabilities Against Assets		WP Ref.:
		Prepared by:
		Date:
		Reviewed by
		Date
Client:
Period:
Subject:	Liabilities Against Assets

		Amount in Rs.
Account balances:
Classes of transactions:

S. No.	Audit Objectives	Assertions	Risk Assessment
			IR	CR	ROSM
	To ensure that liability represents valid claims by lessor against assets leased to the entity under finance lease arrangements.	Existence, Rights & Obligations
	To ensure that the entire liability against finance lease arrangements has been accounted for in the books of the company on a timely basis.	Completeness
	To ensure that liability is recorded at the correct amount.	Valuation
	To ensure that the liability has been presented, classified and disclosed in the financial statements in accordance with the requirements of applicable financial reporting framework i.e. Companies Ordinance, 1984 and applicable International Financial Reporting Standards.	Presentation & Disclosure

S. No.	Audit Procedures	Done by	W. P. Ref.
Analytical Procedures
	1.      Compare balances to prior periods and budgets seeking explanations for unusual items and significant variances.
	2.      Review movement during the year in long term deposits and ensure reasonableness of changes during the year.
Test of Details
1.	TEST LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE.
	A.     Obtain a schedule(s) of Finance and operating leases (including any that existed at the end of the prior year, as well as any new leases).  For finance leases, the schedule should show beginning and ending balances and borrowings and repayments during the year. For operating leases, the schedule should show current-year rent expense.
	1.      To obtain assurance about the completeness of the schedule:
	1.1    Make inquiries of knowledgeable management.
	1.2    Consider any evidence of additional leases obtained through examination of minutes of the board, significant contracts, confirmations of bank accounts, support for subsequent cash disbursements (when testing payables) or for property additions, and other documents.
	2.      Test the summarization and trace the ending balances (for operating leases, the current-year amount of rent expense) to the general ledger.
	B.     Read the lease agreements (or descriptions thereof in our permanent files) and determine that each is accounted for as a capital or an operating lease, as appropriate. Determine that the leased property is still in use.

S. No.	Audit Procedures	Done by	W. P. Ref.
	C.     Make a selection of finance leases. Prepare, or have the client prepare, confirmation requests, and perform the following:
	1.      Ascertain that the confirmations request all information likely to be relevant to our tests of the leases and related interest balances (e.g., applicable interest rates, due dates, the date to which interest has been paid, and the nature and original value of the property leased).
	2.      Mail the request under our control to the lessor.
	3.      Send second requests for non-replies.
	4.      Compare replies to requests. Prepare, or have the client prepare, reconciliations of exceptions.  Trace reconciling items to supporting documents.
	D.     For new lease obtained during the year:
	1.      Review the lease agreements to ascertain its nature as to finance or operating lease.
	2.      Check proper approval of lease transaction.
	3.      Ensure that only principal portion has been recorded as liability against assets subject to finance lease.
	4.      Review the security documents.
	5.      Evaluate results of the tests.
2.	TEST RENTAL EXPENSE
	A      For rentals paid during the year check the following:
	1.      The amount of lease rentals from lease amortization schedule.
	2.      Proper bifurcation of lease rental into principal portion paid and finance charges paid.

S. No.	Audit Procedures	Done by	W. P. Ref.
	3.      Verify payment from bank statements.
	4.      Check calculation financial charges amortization schedule.
	B.     For selected parties, circularize confirmation requests. Match replies to confirmation with amount given in the schedule.
	C.     Evaluate results of the tests.
3.	TEST VALUATION AND PRESENTATION
	A.     Check that lease liabilities are properly bifurcated into current and non-current portions.
	B.     Determine that disclosures have been made in accordance with requirement of Companies Ordinance, 1984 and relevant accounting pronouncements.