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Audit Program for Interest Expense

This document provides an audit work program for interest expense. The objectives are to determine if interest expense represents all interest incurred and is properly recorded, classified, and disclosed. The procedures include analytical procedures to compare interest expense accounts to prior periods and budgets, predict expense based on rates and balances, and calculate average rates. Detailed tests will have the client prepare an interest payment schedule to verify amounts, review propriety, examine supporting documents, and cross-reference to accrued interest. The work will also include internal control and supervision procedures before concluding on the audit objectives.

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Chinh Le Dinh
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100 views2 pages

Audit Program for Interest Expense

This document provides an audit work program for interest expense. The objectives are to determine if interest expense represents all interest incurred and is properly recorded, classified, and disclosed. The procedures include analytical procedures to compare interest expense accounts to prior periods and budgets, predict expense based on rates and balances, and calculate average rates. Detailed tests will have the client prepare an interest payment schedule to verify amounts, review propriety, examine supporting documents, and cross-reference to accrued interest. The work will also include internal control and supervision procedures before concluding on the audit objectives.

Uploaded by

Chinh Le Dinh
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Joy Celeste C.

Embudo
May 30, 2003
jcembudo@[Link]

Audit Work Program – Interest Expense


Subsidiary/Department:
Date:

AUDIT OBJECTIVES:

To determine whether:

1. Interest expense (including amortization of debt discount and premium) represents all interest incurred during
the period and has been properly recorded.

2. Interest expense is properly described and classified and adequate disclosures with respect to these amounts
have been made.

AUDIT PROCEDURES:

WP Done
Procedures By Date Comments
Ref. Y/N?

1) ANALYTICAL PROCEDURES—GENERAL

a. Compare the balance of each significant interest


expense account with the comparable balance for the
preceding period and with the budgeted balance for
the current period. Investigate significant or unusual
fluctuations.

b. Predict interest expense for the period by category of


borrowing by multiplying the average principal
amounts outstanding during the period by the
expected average interest rates. Compare the
predicted amounts with the recorded amounts and
investigate significant differences.

c. Calculate average effective interest rates for the


period by category of borrowing or by type of debt
instrument by dividing recorded interest expense by
the average principal amounts outstanding during the
period. Compare calculated interest rates to expected
interest rates based on confirmation with third
parties, examination of debt agreements, etc.
Investigate significant differences.

2) DETAIL TESTS OF INTEREST EXPENSE

a. Have the client prepare a schedule of interest


payments by debt instrument. Verify the clerical
accuracy of the schedule and test it as follows:

1. Determine whether the detail agrees in total to


the recorded interest expense for the period.
Investigate significant or unusual reconciling
items.

2. Review the nature of the amounts included in


interest expense for propriety.
3. Examine ( ) critical forms and documents to
verify the amounts. Scope:( )

4. Cross-reference accrued interest payable at the


end of the period to our testing of accrued
interest payable.

3) ANSWER INTERNAL CONTROL QUESTIONNAIRES

4) SUPERVISION, REVIEW AND CONCLUSIONS

a) Conclude responsive to the audit objectives.

b) Prepare points regarding internal controls and other


business matters.

c) Perform senior review and supervision.

d) Clear senior review points.

e) Clear manager review points.

PERFORMED BY: REVIEWED BY:

Audit Assistant Audit Supervisor

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