Client :

Accounting period :

HIRE PURCHASE AND FINANCE LEASE PAYABLES

AUDIT OBJECTIVES

To gather appropriate audit evidence sufficient enough to form an opinion whether the balances as stated in
the balance sheet:-

1. Finance leases existed, and are controlled by the company.

2. All valid finance leases are included; and

3. The balance included are accurate as to the valuation, presentation and adequately disclosed.

AUDIT PROCEDURES DONE

BY

1. Obtain/prepare a schedule of hire purchase/finance leases detailing the finance

company, relevant assets, amount of installments, principal and finance charges
oustanding classified into amount due:
(a) Not later than 1 year
(b) Later than 1 year and not later than 5 years; and
(c) Later than 5 years.

2. For the schedule obtain in (1) above:

(a) Agree beginning balances to general ledger and prior year's working papers.
(b) Cast and trace totals to general ledger and agree to financial statements.
(c) Match the hire purchase/finance lease to the related assets in property,
plant and equipment movements.
(d) Noted name of the financial institutions and details of assets financed.
(e) Agree closing balance to general ledger.
(f) Cross referenced closing amount to the respective repayment schedule.

3. Obtain confirmations from the financial institutions, using standard

confirmation request. If there are discrepancies, request the company to
prepare reconciliation, and consider the appropriateness of whether audit
adjustments are required to be passed.
4. Review whether the company complies with the repayment terms as stipulated
in the agreement.

5. Addition
(a) Agree additions during the year to Hire Purchase/Finance Lease
agreement and cross examine to property, plant and equipment section.

(b) Agree to the Directors' resolution. (Note: Review the directors' resolutions
to ensure that all hire purchase/finance lease liabilities are accounted
for in the financial statements.)

(c) If sum of digit method is used, prepare repayment schedule using our
standard template and ensure the balance and interest charge is correct.

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AUDIT PROCEDURES DONE

BY

6. Agree payments during the year to payment records and official receipt from
the financial institution.

7. Recalculate the accuracy of the interest-in-suspense charge to income

statement. (Note: Interest should be charged to the income statement on
monthly basis regardless of payment made.)

8. Ensure that unexpired interest-in-suspense is computed based on the

accounting policy of the company.

9. Ensure that leases are classified as finance leases in accordance with

FRS 117/MASB 10 - Leases.

10. For any full settlement made suring the year:

(a) Vouch to external evidences on proof of full payment.

(b) Ensure that related principal and interest-in-suspense are eliminated from
the accounts.

(c) If it relates to disposal of an asset, ensure to check on the asset disposal

 procedures.

Prepare a brief memorandum summarizing results of work performed including

explanation for any unusual items.

Reviewed by : Date :

Team Leader : …………………………… ………………………….

Team Supervisor : …………………………… ………………………….

Team Manager : …………………………… ………………………….

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 Q2
AU / Q2 / 1

BLES

alances as stated in

DATE W/P
REF.
 Q2
AU / Q2 / 1

DATE W/P
REF.