Ch$\mathrm{.}15$ Considerations When Auditing Liabilities

An audit of your client's financial statements would include verifying the balances of liabilities in the Balance Sheet. You would also be auditing the presentation of details regarding the changes to recorded liability balances during the year in the client$-$prepared Notes to the Financial Statements.

But, does your responsibility as an auditor end there? What about the possibility that your client has$$unrecorded liabilities? This should be included as an item to address during your initial risk assessment for the audit and requires that you perform some audit work.

So$,$ what steps would you recommend taking to satisfy yourself that all of your client's interest$-$bearing liabilities have been properly recorded in the financial statements?

Can you tell us about an experience you had or heard about regarding the discovery of material errors in financial statements or account balances for liabilities?$$