Develop the Audit Program - Debt Ref.

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Client: ORION HANEL PICTURE TUBE CO LTD Audit date: 31/12/2002

Financial Statement Assertions

Audit Objectives: E/O C R& V/M P&D
O
 All debt on the balance sheet is real debt due to creditors of the entity. All  
recorded interest on debt has accrued at the balance sheet date.
 All the entity’s debt at the balance sheet date has been recorded. All related 
interest expense that has accrued at the balance sheet date has been recorded.
 Debt is included on the balance sheet at the appropriate amounts. Interest 
expense is stated on the income statement at the appropriate amount.
 The debt on the balance sheet represents obligations of the entity at the balance 
sheet date. Unless otherwise indicated, the debt is not secured by liens on,
pledges of, or security interests in assets or by other collateral, nor has the debt
been assumed or guaranteed by others. There has been compliance with the
provisions of debt agreements.
 Debt and related accounts for discount, premium, debt issuance costs, and interest 
are properly classified, described and disclosed in the financial statement,
including notes, in conformity with prescribed accounting principles.

Assertions:
Existence or Occurrence, Completeness, Rights and Obligations, Valuation or Measurement, Presentation and Disclosure

Audit Procedures to Consider

Assertions Auditor
addressed Check if
by the item is W/P Sign-
procedure applicable Ref. Off
C, V 1. Obtain or prepare a schedule of notes payable, long-term debt,            
capitalized leases and related interest accounts by issue. Test the
clerical accuracy of the schedule and compare totals with the
general ledger. Compare the account balances with those of prior
years and investigate any unexpected changes (or the absence of
expected changes).
E, C, R&O 2. Confirm debt as to the amounts owed (and amounts in sinking            
funds, if any), terms, collateral, restrictions, and the debtor’s
compliance with the provisions of the agreement.
R&O, P&D 3. Review original or authenticated copies of notes, debt            
agreements, or other related documents to determine the terms,
restrictions, and other pertinent provisions.
V 4. Support principal payments through inspection of cancelled            
checks, notes, or bonds.
O, C, M 5. Perform an overall test of the reasonableness of interest expense            
by multiplying the average interest rate by the average amount of
debt outstanding.
E/O, C, R&O 6. Review board minutes, agreements, bank confirmation replies,            
and other documents to verify authorization of long-term debt
and to identify the existence of long-term lines of credit or
similar obligations.
R&O, P&D 7. Review confirmation replies from debt holders to determine            
whether any receivables, inventory, property, plant, and
Date:

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E&Y SMALL BUSINESS DOCUMENTATION Prepared by:

SB-19j (12-00) Develop the Audit Program - Debt Reviewed by:

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Assertions Auditor
addressed Check if
by the item is W/P Sign-
procedure applicable Ref. Off
equipment, and/or other assets are pledged as collateral or subject
to any liens. If necessary, identify the existence of liens or
security interests through confirmation with the appropriate
public filing offices or by inspection of the public records.
R&O 8. Review calculations and other evidence relating to compliance            
with the terms, restrictions, or other provisions of debt
agreements. In the case of non-compliance, review any waivers
obtained and ascertain that debt is properly classified.
E/O, C, V/M 9. Review the long-term debt and related accounts (e.g., interest,            
discount or premium, debt-issuance costs) in the general ledger
and investigate any unusual items.
C 10. Scan miscellaneous cash receipts for possible debt proceeds.            
P&D 11. Review short-term/long-term classification of debt for propriety.            
Review refinancing agreements and debt transactions subsequent
to the balance sheet date to determine their effects on balance
sheet classification or on disclosure.
P&D 12. Obtain or prepare a schedule of debt maturities. Test by reference            
to debt agreements and amortization schedules. Determine that
proper footnote disclosures are made.
13.                  
14.                  

Date:

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E&Y SMALL BUSINESS DOCUMENTATION Prepared by:

SB-19j (12-00) Develop the Audit Program - Debt Reviewed by: