Financial obligations represent the value of the obligations contracted by the company by obtaining resources from credit institutions or other financial institutions or other entities different from the above, in the country or abroad.
The handling of this type of credit must be handled with special care by those responsible for the financial area of the company, since at the time of acquiring long-term obligations, a great responsibility is acquired with a third party and defaulting on any of the The terms of the loan contract can lead to sanctions that can isolate the organization from financing, which at a certain moment can be of great help for financial management.
The role of the auditor is highly relevant in what has to do with this business aspect, since through its examination it is possible to notice the failures that are occurring in the efficient and effective management of the management and control systems of the obligations with entities of this type.
The following are the audit objectives and procedures that auditors should consider to implement a good audit program in their examination of financial obligations.
Audit objectives for financial obligations
General
- Verify that Generally Accepted Accounting standards are met Determine whether or not there is continuity within the standards applied from one period to another Allow the system to evaluate internal accounting control through questionnaires, interviews and flow charts Verify the correct classification of the accounts corresponding to this group, depending on whether they are long or short term Strengthen the Internal Control system to ensure that the authorization system is respected and allow for certainty about the legitimacy of the obligations contracted by the company Check that the accounts of this item are well classified and adequately presented within the Balance Sheet.
Effective planning
The financial auditor must set the goals to which he must reach at the end of his examination, and thus be able to obtain a high degree of confidence in the pronunciation of his opinion
Specific
- Check whether the financial obligations are well valued Check the authenticity of the obligations contracted with financial entities Check that the debts presented in this item really exist Check that the items of financial obligations are recognized in the corresponding unit of measure Verify that the loans made have the proper authorization Verify that there are written approvals of all the loans requested Determine if all the financial obligations pending payment have been correctly recorded Verify the precision in the calculation and registration of interest expenses and corresponding provisions Verify that these obligations have been contracted with entities authorized by the Banking Superintendency,and agreed at market interest rates. Evaluate the company's situation in order to determine if the company is in a position to respond for these obligations and / or to contract new ones.
Obtaining a loan with a financial institution is established by the negotiation conditions and strength of the company to meet long-term obligations
Audit procedures financial obligations
- Prepare a list of Financial obligations indicating the dates of origin, renewal and expiration, beneficiary, amount, payments or endorsements and, if possible, interests Compare the book balances of financial obligations with the list and verify the age of the Obligations Request confirmation of balances to financial obligations Investigate the existence of debit balances and reclassify them to an asset account Examine monthly statements of financial obligations as a basis for checking individual balances Investigate large, abnormal or old balances and obtain an explanation for them Examine from its origin, through selective tests each transaction from authorization to payment, noting the reductions and their possible effect on the amount pending payment at the end of the period.Check the regular monthly statements of the financial obligations against the liability registered at the end of the year. Prepare a request signed by the legal representative of the company before the respective entity or entities.
At the end of the review of financial obligations, the auditor must prepare the audit program that he is going to carry out during the examination of the company, this will be the one that gives him reasonable assurance about the study he has carried out.
