AUDIT PROGRAM-

TRADE AND
OTHER PAYABLE
SALAHUDDIN K. SHAMEEM, ACA
PROPRIETOR AND CEO
SHAMEEM KHALED SALAHUUDIN & CO.
CHARTERED ACCOUNTANTS
 TOPICS TO BE
COVERED
• Audit objectives relating to trade and
other payables
• Preparation and circulation of
balance confirmation
• Checking the subsequent adjustment
of payables
• Testing for unrecorded liabilities
• Alternative procedure where
unfavorable response or no response
obtained from the creditors
 • Audit objectives relating to trade and
other payable focus on ensuring that
these transactions are properly
recorded, accurately valued,
Audit appropriately authorized, correctly
classified, and adequately
objectives disclosed in the financial
statements, and that internal
relating to controls related to these
transactions are effective in
trade and mitigating risks of misstatement.
other • the objective of auditing trade and
other payable accounts is to obtain
payables reasonable assurance that these
accounts are fairly presented in the
financial statements and that they are
free from material misstatement due
to error or fraud.
 Objectives relating to trade and other payable
typically include the following:
Completeness: Auditors aim to ensure that all trade and
other payables that should be recorded in the financial
statements are included. This involves verifying that all

Audit liabilities owed by the company to its suppliers and creditors

have been properly recorded and disclosed.

objectives Accuracy: Auditors verify the accuracy of the amounts

recorded in the trade and other payable accounts. This

relating to includes verifying that the recorded amounts are

mathematically accurate, properly classified, and properly

trade and
presented in the financial statements.
Existence and occurrence: Auditors verify the existence and

other occurrence of trade and other payable accounts by

obtaining direct confirmations from suppliers and creditors.

payables
This helps to ensure that the recorded payables represent
bona fide obligations of the company and are not fictitious
or fraudulent.
Rights and obligations: Auditors verify that the company has
the legal right to record the trade and other payables and
that the obligations to pay these amounts are valid and
enforceable.
 Cut-off: Auditors verify that trade and other payable
transactions have been recorded in the correct
accounting period, i.e., the financial statements reflect
payables that are outstanding as of the balance sheet
date, and that any liabilities incurred after the balance
sheet date are properly disclosed.
Audit Valuation and allocation: Auditors assess whether the

objectives
trade and other payable accounts are properly valued
and allocated. This includes verifying that the recorded
amounts are consistent with the underlying invoices,
relating to purchase orders, and other supporting documentation,
and that any estimates or accruals related to payables
trade and are reasonable and supported by appropriate
evidence.

other Presentation and disclosure: Auditors verify that the

presentation and disclosure of trade and other payables
payables in the financial statements are in accordance with
applicable accounting standards and regulations. This
includes verifying that the payables are properly
classified, disclosed in the appropriate financial
statement notes, and presented in a clear and
understandable manner
Preparation and
circulation of balance
confirmation
Why is balance
confirmation required?
• The preparation and circulation of balance
confirmations for trade and other payable
accounts is an important step in the audit
program to obtain evidence about the
accuracy and completeness of these accounts.
 • Identify the trade and other payable accounts: Review the
financial statements and the general ledger to identify the trade and other
payable accounts that need to be confirmed. This may include accounts
such as accounts payable, accrued expenses, and other liabilities
related to trade creditors or other creditors.
• Prepare confirmation requests: Prepare confirmation requests to be
sent to the relevant suppliers or creditors. Confirmation requests typically
include the name of the company, the account balance to be
confirmed, the period covered, and a request for the supplier or
Outline of creditor to confirm the balance as of a specific date. The confirmation
request should be clear, concise, and specific to the account being
confirmed.

the steps for • Obtain contact information: Obtain the contact information for the
suppliers or creditors, including their names, addresses, email addresses,
and phone numbers. This may involve coordinating with the client's

Preparation
accounting or purchasing department to ensure that the correct contact
information is obtained.
• Send out confirmation requests: Send out the confirmation requests to
of Balance the suppliers or creditors. This can be done via email, mail, or other
agreed-upon methods. It's important to keep a record of the
confirmation requests sent, including the date sent, the method used,
and any follow-up actions taken.
Confirmation • Follow up on non-responses: Follow up on non-responses or
incomplete responses from the suppliers or creditors. If confirmation
requests are not responded to within a reasonable time frame, it may
be necessary to send reminders or follow up with additional inquiries to
obtain the necessary confirmation.
• Review and evaluate responses: Once the responses are received,
review and evaluate them for completeness and accuracy. Compare
the confirmed balances with the recorded balances in the financial
statements and investigate any discrepancies or differences. This may
involve reconciling the confirmed balances with the general ledger,
reviewing supporting documentation, and obtaining explanations from the
client or the suppliers/creditors.
 • Document the results: Document the results of the confirmation
process, including the responses received, any
discrepancies identified and resolved, and any additional
procedures performed. This documentation should be included
in the audit working papers as evidence of the procedures
performed and the conclusions reached.
• Assess the reliability of confirmations: Assess the reliability of
the confirmation responses obtained by considering factors such as
Outline of the competence and independence of the confirming
party, the adequacy of the confirmation process, and any
inconsistencies or unusual responses. If there are any concerns
the steps for about the reliability of the confirmation responses, additional
procedures may be necessary to obtain sufficient and appropriate
audit evidence.
Preparation • Evaluate the impact on the audit: Evaluate the impact of the
confirmation responses on the audit as a whole, including any

of Balance adjustments or disclosures that may be required in the

financial statements as a result of the confirmation process.

Confirmation • Communicate results: Communicate the results of the

confirmation process to the appropriate parties, including the
client's management, audit committee, and other relevant
stakeholders, as necessary.
Overall, the preparation and circulation of balance confirmations
for trade and other payable accounts is a critical audit procedure
that helps auditors obtain reliable evidence about the accuracy
and completeness of these accounts and supports their audit
conclusions. Proper documentation and communication of the
results are essential for a thorough and effective audit.
 Dated: 25.09.2022
To
The Partner
OMNI Shoes Ltd
36 Postogola, D.I.T, Industrial Area,
Dhaka-1204.

Sub: Confirmation of Balance Outstanding.

Dear Sir,
In connection with periodical examination of our accounts we shall appreciate your confirming
directly to our auditors Hussain Farhad & Co., the status of your accounts with us at June 30, 2022.
Our books show the following balance(s) as on June 30, 2022.

Sample
Due to you (Dr) 1,272,500 Taka

Please compare the above balance with your records and report in the space provided below. Please
return the entire form duly signed at the appropriate space below. A stamped envelope addressed to

format for
the auditors in enclosed for your reply.

Thanking you in anticipation

Yours faithfully,

Balance ………………………………………………………………………………………………………
Hussain Farhad & Co.
Chartered Accountants
House # 15, Road # 12,

confirmation
Block-F, Niketon, Gulshan-1,
Dhaka-1212.

Re: Confirmation of Balance Outstanding

Confirmed that on _________________ an amount of Taka _____________ is due to/by us.

Explanation of difference, if any:

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________

(Continue to reverse side if space is inadequate)

Dated: ___________ Signature: _______________

Checking the
subsequent adjustment
of payables
• Checking the subsequent
adjustment of payables is an
important step in the audit process
to ensure that any
adjustments made by the
client after the balance sheet
date are properly accounted
for and disclosed in the financial
statements.
 • Understand the client's subsequent events process: Gain an
understanding of the client's procedures and controls for identifying,
recording, and disclosing subsequent events, including adjustments to
payables. This may involve reviewing the client's accounting
policies, internal controls, and discussions with management
and relevant personnel.
• Review subsequent events after the balance sheet date: Identify

Steps for
subsequent events that occurred after the balance sheet date but before
the date of the auditor's report. This may include events such as
changes in the company's liabilities, including payables, as a

Checking
result of purchases, returns, cancellations, discounts, or other
adjustments.
• Obtain and review supporting documentation: Obtain and review
the supporting documentation for subsequent adjustments to payables, such
as invoices, purchase orders, credit memos, and other relevant
documents. Verify the accuracy, validity, and completeness of
subsequent these adjustments, and assess whether they are appropriately
recorded and disclosed in the financial statements.

adjustment • Verify cutoff procedures: Verify that the client has properly applied
cutoff procedures to ensure that subsequent adjustments to payables are
recorded in the correct accounting period, i.e., adjustments related to

of payables
events that occurred after the balance sheet date are recorded
in the subsequent period and not included in the balance sheet
as of the balance sheet date.
• Assess the appropriateness of adjustments: Assess the
appropriateness of the adjustments made by the client to payables. This
may involve evaluating whether the adjustments are consistent
with the client's accounting policies, IFRS, and other relevant
accounting standards, and whether they are supported by
appropriate documentation and evidence.
 • Evaluate the impact on financial statements: Evaluate the impact of
the subsequent adjustments to payables on the financial statements,
including the balance sheet, income statement, and related
financial statement notes. Consider whether the adjustments are
material and whether they require any additional disclosures or
explanations in the financial statements.

Steps for • Test the effectiveness of controls: Test the effectiveness of the client's
controls over subsequent adjustments to payables, including their
identification, recording, and disclosure. This may involve testing the

Checking client's procedures for identifying subsequent events, reviewing

the design and implementation of internal controls, and
performing substantive procedures to obtain audit evidence.

the • Document the results: Document the results of the procedures

performed, including the nature, timing, and extent of the

subsequent procedures, the findings, and the conclusions reached. This

documentation should be included in the audit working papers as
evidence of the procedures performed and the conclusions reached.

adjustment • Communicate results: Communicate the results of the audit

procedures related to subsequent adjustments of payables to the

of payables
appropriate parties, including the client's management, audit
committee, and other relevant stakeholders, as necessary.
Overall, checking the subsequent adjustment of payables is a critical
audit procedure that helps auditors ensure that any adjustments made by
the client after the balance sheet date are properly accounted for and
disclosed in the financial statements, and that the financial statements
are presented fairly in all material respects. Proper documentation,
communication, and evaluation of the impact on the financial
statements are essential for a thorough and effective audit.
 Audit Objective: To verify the accuracy, cut-off and completeness of
subsequent adjustments to payables made by the client after the balance sheet
date. Audit Procedures:

1. Review cut-off procedures: Obtain an understanding of the client's

cutoff procedures for recording payables and subsequent adjustments.
This may include reviewing the client's policies and procedures related to

Audit cutoff testing, reviewing the client's cutoff procedures documentation,

and interviewing relevant personnel responsible for cutoff procedures.

program of 2. Obtain subsequent events list: Request and review the client's
subsequent events list, which should include all events that occurred
after the balance sheet date but before the audit report date. Pay

checking
particular attention to events related to purchases and payables.

3. Select a sample of subsequent adjustments: From the subsequent

subsequent
events list, select a sample of subsequent adjustments related to payables. The
sample should be representative and based on factors such as
materiality, risk assessment, and significance of the adjustment.

adjustment
4. Inspect supporting documentation: For each selected subsequent
adjustment, inspect the supporting documentation, such as invoices,
purchase orders, receiving reports, and other relevant documents, to

of payables
verify the accuracy and validity of the adjustment. Compare the information
on the documents with the corresponding recorded amounts in the
financial statements.
5. Verify cut-off dates: Verify that the subsequent adjustments are recorded in
the correct accounting period, i.e., after the balance sheet date and before the
audit report date. Check the dates on the supporting documentation and
compare them with the date of the subsequent event and the date of
recording in the financial statements.
 6. Evaluate accounting treatment: Evaluate the appropriateness
of the accounting treatment applied to the subsequent adjustments. This may
involve comparing the client's accounting policies, Local GAAP, and
other relevant accounting standards to ensure that the adjustments are
recorded and disclosed in accordance with the appropriate accounting
principles.

Audit 7. Test controls over subsequent adjustments: Test the

effectiveness of the client's controls over subsequent adjustments to payables.
This may involve testing the client's procedures for identifying,

program of recording, and disclosing subsequent events, as well as reviewing

the design and implementation of internal controls related to
payables.

checking 8. Consider materiality: Consider the materiality of the subsequent

adjustments in relation to the financial statements as a whole. If the

subsequent adjustments are material, perform additional substantive

procedures, such as recalculations, reperformance, or analytical
procedures, to obtain sufficient audit evidence.

adjustment 9. Document findings: Document the nature, timing, and extent of the
audit procedures performed, as well as any findings or issues identified during

of payables the audit related to subsequent adjustments to payables. Record the

conclusions reached and any necessary follow-up actions.
10. Communicate results: Communicate the results of the audit
procedures related to subsequent adjustments to payables to the appropriate
parties, including the client's management, audit committee, and other
relevant stakeholders, as necessary. Discuss any findings or issues
identified during the audit, and provide recommendations for improvements, if
applicable.
 • Obtain an understanding of the entity's financial reporting process and
internal controls related to liabilities. This includes reviewing relevant
documentation such as policies, procedures, and control manuals, and
performing walkthroughs to assess the design and effectiveness of internal
controls.
• Review the prior year's audit workpapers and financial statements for any
indications of unrecorded liabilities, including any identified control
deficiencies or significant audit findings related to liabilities.
• Perform analytical procedures to identify potential unrecorded liabilities. This
may involve comparing current year balances to prior year balances,
industry benchmarks, or other relevant data to identify any significant
fluctuations or anomalies that may indicate potential unrecorded
liabilities.
Testing for • Request and review documentation from management, such as financial
unrecorded statements, board minutes, contracts, invoices, and other relevant
records, to identify potential unrecorded liabilities. This may include
obtaining representations from management regarding the completeness
liabilities of liabilities.
• Perform substantive audit procedures to test for the existence and
completeness of unrecorded liabilities. This may involve procedures such
as confirming balances with third parties, examining contracts and
other legal agreements, reviewing vendor invoices and other
supporting documentation, and performing other audit procedures as
appropriate based on the nature of the liabilities.
• Evaluate the adequacy of the liability recognition and measurement criteria
applied by the entity, including reviewing the entity's accounting policies,
and assessing the reasonableness of estimates and assumptions used in
determining the liabilities.
 • Consider the potential for contingent liabilities and commitments that may
not have been recorded and review relevant disclosures in the financial
statements for completeness and accuracy.
• Review bank statements, invoices, receiving reports, and other
relevant documents for the period after the balance sheet date but
before the audit report date to identify any potentially unrecorded
liabilities that may have been incurred during this period.
• Review vendor and supplier contracts, purchase orders, and other
relevant documentation to identify any potential liabilities that may
have been incurred but not yet recorded. This may include identifying
purchase commitments, agreements for goods or services, and other
obligations that may not have been recorded as liabilities.
• Test the effectiveness of the client's controls over the identification,
Testing for recording, and disclosure of liabilities. This may involve testing the design
and implementation of internal controls related to liabilities, as well as
unrecorded performing substantive tests of controls to assess their operating
effectiveness.

liabilities • Document the audit procedures performed, the results of the procedures,
and any identified unrecorded liabilities or other issues, including the
nature, timing, and extent of the audit procedures performed.
• Communicate any identified unrecorded liabilities or other significant
findings to the appropriate level of management and the audit committee,
as required by auditing standards.
It is important to note that the specific procedures and extent of
testing may vary depending on the auditor's professional judgment
and the assessed risks of material misstatement related to
unrecorded liabilities. It is crucial to follow applicable auditing
standards and obtain sufficient and appropriate audit evidence to
support the audit opinion.
Alternative procedure where
unfavorable response or no
response obtained from the
creditors
• When conducting an audit, the
auditor may encounter situations
where they are unable to obtain a
favorable response or any response
at all from creditors regarding
confirmation of balances.
• In such cases, the auditor may need
to perform alternative audit
procedures to obtain sufficient audit
evidence.
• Some possible alternative audit
procedures in case of unfavorable or
no response from creditors may
include:
 Subsequent Payments and
Disbursements Testing: The auditor can
perform a review of subsequent payments
and disbursements made by the entity after
the balance sheet date to creditors whose
balances were not confirmed. This can help
the auditor identify any discrepancies or
irregularities in the amounts paid or
Alternative procedure disbursed and assess the validity and
where unfavorable accuracy of the related liabilities.
response or no
response obtained
from the creditors Internal Documentation and
Correspondence Review: The auditor
can review internal documentation and
correspondence, such as purchase orders,
invoices, contracts, and other relevant
records, to verify the existence and validity
of creditor balances. This can involve
tracing transactions and verifying the
completeness and accuracy of supporting
documentation related to creditor
balances.
 Alternative Confirmations: If a creditor does
not respond to a confirmation request, the
auditor may consider sending subsequent
confirmation requests or performing alternative
procedures, such as sending a second
confirmation request using a different
communication method (e.g., email or fax) or
Alternative procedure contacting the creditor directly by phone to
follow up on the confirmation request.
where unfavorable
response or no
response obtained Inquiry with Management and Other Third
from the creditors Parties: The auditor can conduct additional
inquiries with management, relevant personnel,
or other third parties, such as the entity's legal
counsel, financial advisors, or other external
parties, to gather additional information or
explanations regarding the creditor balances.
This can involve obtaining written representations
from management regarding the completeness
and accuracy of creditor balances.
 Reconciliation and Reperformance: The auditor can
Alternative perform a detailed reconciliation and reperformance of
creditor balances by comparing the balances recorded
procedure where in the entity's accounting records with supporting
unfavorable documentation, such as vendor statements, purchase
response or no orders, invoices, and other relevant records, and
reperforming calculations and other procedures to verify
response obtained the accuracy and completeness of creditor balances.
from the creditors
Additional Substantive Testing: The auditor may need to
perform additional substantive testing procedures, such
as testing the accuracy and completeness of
transactions related to creditors, reviewing supporting
documentation, and performing other audit procedures
to obtain sufficient audit evidence to support the
creditor balances.
Alternative procedure Reviewing correspondence or Evaluating management's estimates
where unfavorable communication with creditors: and assumptions: Auditors can
response or no Auditors can review any critically evaluate management's
correspondence or communication estimates and assumptions used in
response obtained with creditors, such as emails, letters, determining the liabilities, including
from the creditors or other written or electronic assessing the reasonableness of
communication, to identify any assumptions such as expected
information that may indicate the payment terms, interest rates, and
existence of unrecorded liabilities or discount rates. This can help identify
commitments. any potential errors or omissions in
the estimation process that may
impact the completeness of
liabilities.
 Alternative procedure
where unfavorable
response or no response
obtained from the creditors

Obtaining legal or expert opinions: The

Management Representations: The auditor may seek legal or expert opinions to
auditor may request written representations obtain additional evidence related to the
from management regarding the payable balances. For example, the auditor
completeness and accuracy of liabilities, may seek legal opinions on the validity and
including any unrecorded liabilities or enforceability of contracts or other legal
related disclosures, and any obligations that give rise to payables, or
communications or interactions with expert opinions on the valuation or
creditors. measurement of complex payables
balances.
THANK YOU