Control over audit of loans and borrowings. Audit of credits and loans. Despite the apparent simplicity of reflecting received loans in an enterprise’s accounting records, audits reveal a fairly large number of errors and violations

Loan check

The methodology for auditing loan transactions is basically no different from auditing loan transactions. The audit is carried out on account 66, subaccount 4, 5, “Settlements for short-term loans in rubles and foreign currency,” and account 67, subaccount 4,5, “Settlements on long-term loans in rubles and foreign currency.”

The auditor must ensure that the loan agreement is correctly drafted and concluded.

For an organization, the absence of a written agreement can have negative consequences (for example, if disputes arise regarding the amount of interest for using a loan, the procedure and timing of loan repayment; even in the absence of disagreements between the parties, tax authorities make claims related to the lack of an agreement as a document confirming fact of transactions under the loan agreement).

During the inspection of loans, it is established: whether the loan agreements were drawn up correctly, whether the principal amount of the debt and interest on loans were repaid on time, whether transactions on loans received were correctly reflected in the accounting records, including the accrual and transfer of interest, the reliability of analytical and synthetic accounting of loan settlements. When studying a loan agreement, special attention is paid to the presence in them of instructions on the loan repayment period, its form, the presence of collateral, the amount of interest and the procedure for their payment. If the lender is an individual, the loan agreement must be notarized.

To check the timeliness of loan repayment based on agreement data and current account statements and cashier reports, an analytical table is compiled that reflects the dates and amounts of receipt and repayment of loans, as well as any deviations that have arisen.

Settlement and credit operations are carried out through the bank, which systematically monitors the correctness of calculations and compliance with settlement discipline. At the beginning of the audit, the auditor should establish what types of loans the company used, and then find out directly from the bank that issued the loans, the planned amounts of loans, whether the company violated the rules for carrying out credit transactions, whether sanctions were applied to it and what, what the bank’s conclusions are on quarterly and annual reports, on acts of verification of the intended use of loans and ensuring their repayment.

The auditor also finds out what claims the bank has regarding the correctness of execution and timely submission of calculations and messages necessary for lending, and compliance with loan repayment deadlines.

At the enterprise, the auditor compares the receipt of loans according to the order journals with the planned size of the loan, finds out the reasons why it was not fully used, and determines whether this did not harm the financial condition, in particular, the timely repayment of accounts payable and the fulfillment of obligations regarding the payment of taxes in budget.

In the act, the auditor must indicate cases of overdue loans, as well as the use of loans provided with the collection of increased interest, and determine the amount of damage that the company received in connection with this. There must be identified and specific culprits of the violations committed in order to recover the amount of damage from them.

When checking the use of loans received to issue funds to employees of an enterprise, or to pay for goods purchased on credit, it is necessary to compare the account data regarding the workers' debt with the account data regarding the amount of the outstanding loan on the 1st day of each month. These data must be the same.

In addition, the legality of the issuance of loans and its validity with primary documents (statements-obligations of employees and necessary certificates), the timeliness of debt retention and the identity of analytical data on the wage debt of employees with the final balance of the corresponding sub-account are subject to verification. Based on personal files, you should check whether all debtors at the time of the audit were included in the list of employees of the enterprise.

Analysis of loans provided can be carried out either selectively or for the entire volume of loans provided.

Auditors determine the list of loan agreements to be audited. In the process of verifying the correctness of the loans provided, it is necessary to examine the following documents:

Rules for the formation and use of funds. The requirements of this document are compared with the conditions reflected in the contracts being verified;

Loan agreement. Attention is drawn to the conditions determined by the agreement (characteristics of the borrower, date of provision of the loan, date of repayment of the loan, interest rate for using the loan, loan payment schedule and other characteristics determined by the commission for study);

The actual dates of the loan (cash receipts) and the actual repayment of the loan and interest on it (cash receipts for each payment). The actual results obtained are compared with the conditions reflected in the contract.

List of overdue loans. By randomly checking loans, you should ensure that all cases of loan delinquency are recorded and subject to regular monitoring.

If there are deviations from the provisions of the agreement, then it is necessary to draw up an appropriate conclusion for each agreement.

When checking operations on issued loans, it is necessary to pay attention to the procedure for reflecting interest due under the loan agreement: whether the organization complies with the assumption of temporary certainty of the facts of economic activity. This means that interest amounts under a loan agreement should be reflected on an accrual basis, rather than on the actual receipt of funds.

When providing a loan with material assets (things that have generic characteristics), it is necessary to check how the loan was repaid - in cash or in equal quantities of material assets of the same kind and quality, since in the first case (repayment of the loan in cash) the operation will be considered by the tax authorities as concealment of the object of taxation by value added tax and income tax.

- 85.58 Kb

Analytical accounting for loans and borrowings at an enterprise should be organized:

By type of credits and loans (ruble, foreign currency);

Banks and other organizations and individuals from whom it was received;

Purpose of loans;

Terms (overdue loans; loans whose repayment period has not yet come);

Participation in the calculation of taxable profit.

A carefully thought-out and well-organized analytical accounting of loans and borrowings from an economic entity will help the accountant of this enterprise and the inspectors to check the correctness of the accrual of interest on these loans.

Drawing up a plan and program for auditing borrowed funds

The term “planning” means the development of a general strategy and a detailed approach to the audit, determined by the timing of the audit and the scope of audit procedures.

Planning an audit in general and an audit of borrowed funds in particular is carried out in accordance with the rules of auditing activities “Audit Planning”, approved by Resolution of the Ministry of Finance of the Republic of Belarus dated August 4, 2000 No. 81.

Planning, being the initial stage of an audit, includes the development by the audit organization of an audit plan indicating the expected volume, schedule and timing of its implementation, as well as the development of an audit program that determines the volume, types and sequence of audit procedures necessary for the audit organization to form an objective and informed opinion about the financial statements of the organization.

Audit planning must be carried out by the audit organization in accordance with the general principles of auditing, as well as in accordance with the following specific principles:

The principle of comprehensiveness of audit planning involves ensuring the interconnectedness and consistency of all stages of planning from preliminary planning to drawing up a general plan and audit program;

The principle of continuity of audit planning provides for the establishment of related tasks for a group of auditors and the linking of planning stages by time frame and by related business entities (structural divisions allocated to a separate balance sheet, branches, representative offices, subsidiaries);

The principle of optimal audit planning implies ensuring planning variation in the planning process of the audit organization in order to be able to select the optimal option for the overall plan and audit program based on criteria determined by the audit organization itself.

Planning an audit of an audit organization consists of the following main stages:

Pre-audit planning;

Preparation and drawing up of a general audit plan;

Preparation and drawing up of an audit program.

At the preliminary planning stage, the auditor must become familiar with the financial and economic activities of the economic entity and have the following information:

On external and internal factors influencing the economic activities of an economic entity, reflecting the economic situation in the Republic of Belarus as a whole and its sectoral characteristics;

In addition, the auditor should become familiar with:

Organizational and managerial structure of an economic entity;

Types of production activities and range of products;

Capital structure and share price (if the shares of an economic entity are subject to quotation);

Level of profitability;

The main buyers and suppliers of the economic entity;

The procedure for distributing profits remaining at the disposal of the organization;

The existence of subsidiaries and dependent organizations;

An internal control system organized by an economic entity.

At the preliminary planning stage, a Preliminary Planning Sheet is drawn up, in which auditors reflect the following information on transactions with creditors and loans (Table 1)

Table 1 - Pre-planning sheet (fragment)

The preliminary planning sheet is intended to estimate the volume of the organization's documentation to be audited and the total time spent on conducting the audit. Filled out by specialists aimed at preliminary acquaintance with a potential client, based on the results of conversations with the manager, chief accountant (accounting employee), review of documents, etc. As the assessment progresses and based on its results, the information received is either entered into the form, or one of the proposed options is selected and the corresponding cell is marked. If the client refuses to provide any exact information (for example, for reasons of trade secrets), then it is permissible to write down its approximate value (order of magnitude) or indicate “Refused to report.”

The audit organization must develop and document an audit plan describing the expected scope, list of work and timing of its implementation. The overall audit plan should be sufficiently detailed.

In general, the audit organization must provide for the timing of the audit and draw up a schedule for conducting the audit, preparing a report (written information to the management of the economic entity), and an audit report. In the process of planning time expenditure, the auditor needs to consider:

Real labor costs;

Calculation of time spent in the previous period (in case of a repeat audit) and its connection with the current calculation;

Level of materiality;

Conducted audit risk assessments.

In general terms, the audit organization determines the method of conducting the audit based on the results of the preliminary analysis, assessment of the reliability of the internal control system, and assessment of audit risks. If a decision is made to conduct a sample audit, the auditor forms an audit sample.

An integral part of the general plan are provisions for planning management and quality control of the audit performed. In general, it is recommended to provide:

Formation of the audit team, number and qualifications of auditors involved in the audit;

Distribution of auditors in accordance with their professional qualities and job levels for specific areas of the audit;

Instructing all team members about their responsibilities, familiarizing them with the financial and economic activities of the economic entity, as well as with the provisions of the general audit plan;

Control of the manager over the implementation of the plan and the quality of work of the auditor’s assistants, over their maintenance of working documentation and proper registration of audit results;

Explanation by the head of the audit team of methodological issues related to the practical implementation of audit procedures;

Documentation of the dissenting opinion of a member of the audit team (performer) in the event of disagreements in the assessment of a particular fact between the head of the audit team and its ordinary member.

Table 2 – General audit plan for loans and borrowings

Planned types of work	Period	Executor
Reviewing the balance sheet for the presence of an opening balance on line 510 “Credits and borrowings” due for repayment more than 12 months after the reporting date		Safonova N.V.
Reviewing the balance sheet for the presence of an opening balance on line 610 “Credits and borrowings” due for repayment less than 12 months after the reporting date		Safonova N.V.
Viewing the appendix to the balance sheet (form No. 5) of the section “Receivables and payables” of the line “Long-term loans” (columns 3 and 4)		Safonova N.V.
Viewing the appendix to the balance sheet (form No. 5) of the section “Receivables and payables” of the line “Short-term loans” (columns 3 and 4)		Safonova N.V.
Viewing the appendix to the balance sheet (form No. 5) of the section “Receivables and payables” of the line “Short-term loans” (columns 3 and 4)		Safonova N.V.
Viewing the appendix to the balance sheet (form No. 5) section “Receivables and payables” line “Long-term loans” (columns 3 and 4)		Safonova N.V.
Viewing the appendix to the balance sheet (form No. 5) of the “State Aid” section for the balance and budget loans received during the year		Safonova N.V.
Viewing the cash flow statement (form No. 4) line “Proceeds from loans and credits provided by other organizations”		Safonova N.V.
Viewing the cash flow statement (form No. 4) line “Repayment of loans and credits”		Safonova N.V.

Note – source: author’s own development

Drawing up an audit program for loans and borrowings is a labor-intensive and lengthy process. Therefore, it is necessary to develop a standard program for auditing loans and borrowings, which will provide a classification of all possible types of violations when reflecting bank loans and borrowings in the accounting records and a description of audit procedures for identifying these violations. Worksheets should be developed for each procedure, based on the results of checking which the lead auditor has the opportunity to draw certain conclusions.

The auditor should document the audit program, designate each audit procedure performed with a number or code, so that he can refer to them in his working documents during the work process.

The audit program should be designed as a program of tests of controls and as a program of substantive audit procedures.

A control test program is a list of a set of actions designed to collect information about the functioning of the internal control and accounting system. Tests of controls help identify significant deficiencies in an entity's controls.

Audit procedures are essentially a detailed check of the correct reflection in the accounting records of turnover and account balances. The audit procedure program is essentially a list of auditor actions for such detailed specific checks. For substantive procedures, the auditor should determine which sections of the accounting records he will audit and draw up an audit program for each section of the accounting records.

The next stage of the planning process is an assessment of the internal control system, the main purpose of which is to create a basis for planning the audit, as well as to determine the type, timing, and scope of audit procedures that are reflected in the audit program.

An internal control system can be considered effective if it promptly warns about the occurrence of unreliable information and identifies it. When assessing the effectiveness of the internal control system, the audit organization must collect a sufficient amount of audit evidence. If the audit firm decides to rely on the internal control and accounting systems to obtain a reasonable degree of assurance about the reliability of the financial statements, it should adjust the scope of its audit accordingly.

The questions that the auditor needs to ask the management of Dukora-Agro OJSC at the time of planning a program to conduct an audit of loans and borrowings are given in Table 3.

Table 3 - Questions for verification.

	If the answer is positive	If the answer is negative
1. Did the enterprise receive loans from only one bank?	Request from the company loan agreements with the bank with which the bank loan agreements were concluded.	Request from the company loan agreements with banks with which bank loan agreements were concluded.
2. Did the company receive loans by crediting funds to a current account?	Select bank account statements confirming receipt of the loan	Go to next question
3. Were interest amounts exceeding the standard taken into account as tax expenses for income tax?	Find out why interest amounts exceeding the standard were included in tax expenses	Go to next question
4. Were the composition and procedure for writing off additional costs associated with obtaining loans observed according to the accounting policy?	Obtain confirmation from the company that additional costs associated with obtaining loans were written off in accordance with accounting policies	Find out on what principle the enterprise reflected in its accounting additional costs associated with obtaining loans
5. Did the enterprise receive loans denominated in foreign currency or in conventional monetary units?	Select bank statements for a bank account confirming the receipt of a loan, the amount of which is expressed in foreign currency or in conventional monetary units	Go to next question
6. Does the enterprise use the funds from the received loans for prepayment of inventories, works, services, issuance of advances and deposits towards their payment?	Go to next question	Go to next question
7. Was the debt on loans received reflected at the end of the reporting period, taking into account the interest due at the end of the reporting period in accordance with the terms of the agreements?	Obtain confirmation from the company that interest on loans was accrued at the end of the reporting period in accordance with the terms of the agreement	Find out the reasons for the enterprise’s evasion from accruing interest in accordance with the terms of the agreement at the end of the reporting period
8 Did the company issue bills of exchange to obtain a cash loan?	Find out how accounting and internal control of issued bills of exchange were carried out	Go to next question
9. When issuing a bill of exchange, was the procedure for uniform recognition of operating expenses in the form of interest or discount provided for in the accounting policy followed?	Obtain confirmation from the company that interest or discount on issued bills of exchange was included in operating expenses evenly (monthly) and was previously taken into account as deferred expenses	Go to next question
10. Has the company issued (placed) bonds?	Find out how the bonds were issued and how internal control of this process was organized	Go to next question
12. Are interest on loans and borrowings related to the formation of the value of unamortized investment assets included in current expenses?	Obtain confirmation from the enterprise that interest on loans and borrowings related to the formation of the value of non-depreciable investment assets is included in current expenses	Find out what amount of interest on a loan or loan associated with the formation of the value of a non-depreciable asset is included in the cost of this depreciable investment asset
13. Was the transfer of long-term debt on loans and borrowings to short-term debt observed according to the accounting policy?	Obtain confirmation from the company that at the end of the year, long-term debt in accordance with accounting policies, if there were grounds for this, was transferred to short-term debt	Find out why the enterprise, if there were reasons and if there were accounting policy requirements, did not transfer long-term debt to short-term debt
14. Is interest accrued on the loan(s) in accordance with the terms of the credit (loan) agreement?	Obtain confirmation from the company that interest on credits (loans) is accrued in accordance with the terms of the credit (loan) agreement	Find out why the company accrues interest not in accordance with the terms of the credit (loan) agreement, but on a “temporary” principle, i.e. at the end of each reporting period

Description of work

Purpose of the work: to study regulatory and literary sources relating to the audit of accounting for credits and loans and, based on what has been studied, to give recommendations for improving the audit of credits and loans in agricultural organizations. To achieve this goal, the following tasks are set:
- consideration of the sources and objectives of the audit of borrowed funds;
- familiarization with the sequence of the audit;
- consideration of the regulatory and legislative framework for the audit of loans and borrowings;
- studying the main documents subject to mandatory audit;
- identification of typical errors and shortcomings when accounting for loans and borrowings;
- consideration of an audit of the legality of use and timely repayment of short-term and long-term loans and borrowings of the bank;
- description of the procedure for drawing up an audit report on bank loans and loans;
- offer your recommendations for improving the organization and methodology of the audit.

The content of the work

Introduction………………………………………………………………………………4
1 The role and significance of the audit of borrowed funds…………………………………….6
1.1 Objectives and sources of audit of borrowed funds……………………………6
1.2 Drawing up a plan and program for the audit of borrowed funds………………...9
1.3 Review of regulatory documents and economic literature on the research topic …………………………...17
2 Audit of credit relations……………………………………………..19
2.1 Audit of the legality of use and timely repayment of short-term bank loans……….19
2.2 Audit of the legality of use and timely repayment of long-term bank loans………………………...22
2.3 Audit of loans………………………………………………………………..24
3 The final stage of the audit of bank loans and loans …………………..27
3.1 Drawing up an audit report on bank loans and loans……………………...27
3.2 Improving the audit of borrowed funds……………………………..29
Conclusion…………………………………………………………………………………..31
List of sources used………………………………………………………33
Appendix A………………………………………………………………………………..35

The purpose of the audit of credit and borrowings accounting is obtain evidence of the reliability of reporting indicators reflecting the organization’s debt on borrowed funds.

To achieve the purpose of auditing the accounting of loans and borrowings, it is necessary to check:

Reality and documentation of loans and borrowings;

The validity of obtaining credits and loans (sources of obtaining borrowed funds);

Purposeful use of borrowed funds, completeness and timeliness of their repayment (for what purposes were borrowed funds used, how debt on credits and loans is repaid, the presence of overdue debts);

Assessment of balances on outstanding loans and borrowings and payment of interest on them (accounting for interest on loans, participation of interest in the valuation of property and in the formation of financial results);

Maintaining synthetic and analytical accounting of transactions on credits and loans (application of accounts for credits and loans, reflection of transactions for receiving and repaying borrowed funds, compliance with the principles of formation of financial results).

To obtain audit evidence, various techniques are used (checking documents, tracking transactions, analytical procedures to determine the ratio of borrowed and equity funds) and sources of information.

Information base for checking credits and loans are:

Regulatory documents regulating the issues of obtaining borrowed funds, accounting and taxation of transactions with them;

Agreements and primary documents for registration and recording of transactions on loans and borrowings. These include: credit agreements and loan agreements; additional agreements to loan agreements on changes in loan interest rates, loan repayment terms, and other terms of loan agreements; bank statements from personal accounts of organizations for the movement of loans and borrowings.

Accounting statements and registers of synthetic and analytical accounting for reflecting these transactions in accounting. In the financial statements, information for checking this area is contained in the balance sheet (sections “Long-term liabilities” and “Short-term liabilities”); profit and loss statement (interest payable or operating expenses are determined by the amount of interest on loans and borrowings; non-operating income and expenses are determined by the amount of exchange rate and amount differences arising on loans and borrowings received).

To conduct an effective audit of an enterprise’s operations to obtain and use credits, borrowings and targeted financing, the auditor must at the very beginning clearly define control procedures, the sequence of their implementation and the sources of the necessary information. For this purpose, a verification program is being formed

Audit program for loans, loans and targeted financing

Obtaining a bank loan by an enterprise drawn up by a loan agreement, which specifies the object of lending, the period for issuing and repaying the loan, the form of security for obligations, interest rates and the procedure for their payment, the rights and responsibilities of the parties and other conditions.

Accounting for transactions on credits and borrowings is carried out respectively on accounts 66 “Settlements for short-term credits and borrowings” and 67 “Settlements for long-term credits and borrowings”. Analytical accounting of debt on loans and credits received, including issued borrowed obligations, is carried out by type of loans and credits, credit institutions and other lenders who provided them, individual loans and credits (types of borrowed obligations).

The principal amount of debt on a loan and (or) credit received from the lender is taken into account by the borrower organization in accordance with the terms of the loan agreement or credit agreement in the amount of funds actually received or in the valuation of other things provided for by the agreement. The borrowing organization accepts the specified debt for accounting at the time of the actual transfer of money or other things and reflects it as accounts payable.

During the audit, the auditor finds out whether there are loan agreements and whether they comply with the norms of the Civil Code of the Russian Federation (Civil Code of the Russian Federation). In accordance with the Civil Code of the Russian Federation, loan agreements can only be concluded with a bank or other credit organization that has the appropriate license for such operations.

The auditor clarifies whether loans and borrowings are used for their intended purpose or not, how debts on loans were repaid (in the form of cash, by transferring a bill of exchange, by offset). The auditor checks the completeness and timeliness of loan repayments using bank statements.

The auditor should pay attention to issues of loan security. The main types of credit collateral are surety, guarantee, pledge of securities, goods, and other property. Pledge agreements are quite common. In this case, it is necessary to check the reality of the pledge agreement, whether it has been drawn up formally, how specific the pledged items are in it, whether information about the pledge of property is correctly reflected in off-balance sheet account 009 “Securities for obligations and payments issued,” as well as the fact of disclosure of this information in the explanations to the accounting reporting.

Organizations can receive loans from other legal entities (except banks). Enterprises can raise funds in the form of loans from other enterprises and individuals by issuing securities (bonds).

The methodology for auditing loan transactions is basically no different from auditing loan transactions. The auditor must ensure that the loan agreement is correctly drafted and concluded.

The main regulatory document governing the accounting of interest on loans and borrowings is PBU 15/01 “Accounting for loans and credits and the costs of servicing them.”

The auditor must check in what period, in what amount, on what accounts the amounts of interest for the use of loans were reflected or from what sources were covered.

Costs for loans and credits received must be recognized as expenses for the period in which they were incurred, with the exception of that part of them that is subject to inclusion in the cost of the investment asset.

An investment asset is understood as an object of property, the preparation of which for its intended use requires significant time. Investment assets include fixed assets, property complexes and other similar assets that require a lot of time and costs for acquisition and (or) construction. The specified objects purchased directly for resale are accounted for as goods and are not classified as investment assets.

Debt on loans and credits received should be reflected taking into account the interest due at the end of the reporting period in accordance with the terms of the agreements. Information about the organization's accounting policies includes at least the following data:

Transfer of long-term debt to short-term debt;

Composition and procedure for writing off additional borrowing costs;

Selecting methods for calculating and distributing income due on borrowed obligations;

The procedure for accounting for income from temporary investment of borrowed funds.

In case of non-fulfillment or incomplete fulfillment by the lender of the loan agreement and (or) credit agreement, the borrowing organization provides information about the shortfalls in the explanatory note to the annual financial statements.

The organization's financial statements must reflect the following information:

On the presence and changes in the amount of debt for the main types of loans and credits;

Amount, types, maturity dates of issued promissory notes and placed bonds;

Repayment terms of main types of loans, credits, and other borrowed obligations;

Amounts of borrowing costs included in operating expenses and the cost of investment assets;

The values of the weighted average rate of loans and credits (if applied).

Parameter name	Meaning
Article topic:	Audit of settlements on loans and borrowings
Rubric (thematic category)	Production

Audit of calculations for taxes and fees

In the system of settlement relationships of organizations, monetary settlement relations with the budget and extra-budgetary funds occupy a special place.

Rational organization of control over the state of settlements with the budget contributes to compliance with payment discipline and improvement of the financial condition of the organization.

The purpose of auditing settlements with the budget– confirmation of the reliability of the financial statements of the audited legal entity, in terms of reflecting debts to the budget for taxes and fees, as well as reflecting in the explanatory note all significant circumstances related to unresolved issues in taxation.

During the control and audit check, the auditor must check:

‣‣‣whether the taxable bases are calculated correctly;

‣‣‣are tax and payment rates applied correctly;

‣‣‣ whether payments to the budget are made on time and in full;

‣‣‣ are the benefits applied correctly and justifiably;

‣‣‣is analytical and synthetic accounting carried out correctly for account 68 “Calculations for taxes and fees”;

‣‣‣ do the analytical and synthetic accounting records correspond to the records in the general ledger and balance sheet of the organization.

To check the correctness of the organization of analytical accounting for settlements with the budget, it is extremely important to clarify the correctness of the derivation of turnover and balances for each type of tax at the end of the reporting period.

In the balance sheet, debts on account 68 must be reflected in the amounts agreed upon with the tax authorities, for which mutual settlements are reconciled. It is extremely important to compare analytical accounting data for each tax with entries in the synthetic accounting register and the General Ledger for account 68. The timeliness and completeness of settlements with the budget is established by checking bank statements and the primary payment documents attached to them.

During the audit of calculations for taxes and fees, auditors are guided by the Tax Code of the Russian Federation. For this reason, control and audit of these calculations are aimed, first of all, at identifying their compliance with those chapters, articles and norms of the Tax Code of the Russian Federation that regulate tax relations for the collection of relevant taxes and fees.

In the conditions of market transformations taking place in the economy, the role of loans and borrowings as an additional source of financing the activities of organizations has increased significantly.

The task of control over credit operations includes identifying the validity and conditions for attracting borrowed funds, compliance with the established procedure for planning, obtaining, using and repaying short-term and long-term loans and borrowings, as well as determining the effectiveness of their attraction.

Additional sources of information checks for accounting of credit transactions are:

Information and certificates provided to bank institutions to obtain a loan;

Bank statements;

Copies of agreements in support of credited transactions and additional agreements to them;

Loan and pledge agreements;

Documents confirming the intended use of the loan or credit.

The auditor must pay attention to the form in which the loan was taken - in the form of money or things. The auditor must ensure the correctness of:

‣‣‣drawing up and concluding a loan agreement;

‣‣‣organization of accounting of these transactions in the accounts: 66 ʼʼSettlements for short-term loans and borrowingsʼʼ, 67 ʼʼSettlements for long-term loans and borrowingsʼʼ, with special attention paid to the organization of analytical accounting of these transactions by lender and repayment period;

‣‣‣complete receipt and compliance with the intended use of loans;

‣‣‣ reflection in the accounting of loan repayment through the sale of securities at prices exceeding their cost, reflection in the accounting of %% accepted for payment for the use of the loan;

‣‣‣ accounting for exchange rate differences on loans provided in foreign currency;

‣‣‣reflections in the accounting of loans by areas of their use;

‣‣‣ accounting for a loan received against an issued bill of exchange;

‣‣‣timely repayment of loans, by comparing the date of contributions of own funds for payment or bank statements with the established repayment periods.

When checking loans, it is extremely important to identify the validity and conditions for attracting these funds for each lender, for which purpose loan agreements and records on the relevant accounts are subject to control examination.

The rules for issuing loans are developed by creditor organizations, and the loan is issued on the basis of a concluded bilateral loan agreement. The auditor needs to check:

‣‣‣ confirmation of the intended use of the loan;

‣‣‣ timeliness and completeness of repayment,

‣‣‣ the correctness and legality of attributing accrued and paid %% to the appropriate cost accounts or sources of their coverage;

‣‣‣reliability of balances, non-repaid loans;

‣‣‣collateralization of the loan or the existence of provided guarantees for timely non-repayment of loan amounts;

‣‣‣ objectivity of the reasons for violation of loan repayment deadlines.

When checking the issues of obtaining and using loans, the auditor must assess the effectiveness of the invested funds for the activities for which they were intended; what economic effect the organization as a whole received from their use, or vice versa, calculate the losses that the organization may incur in case of inappropriate use of the loan or untimely repayment to the creditor, as well as analyze the sources of covering the unrepaid amounts of creditors and report them.

Audit of settlements on loans and borrowings - concept and types. Classification and features of the category “Audit of settlements on loans and borrowings” 2017, 2018.