Intermediate Audit Staff Training: Auditing Liabilities & Debt

Author: Robert K Minniti

This intermediate level course provides audit professionals with a practical, risk focused framework for auditing liabilities and debt—areas susceptible to understatement, incomplete disclosure, covenant violations, and complex accounting considerations. Participants will learn how to evaluate the recognition, measurement, classification, and disclosure of liabilities and debt in accordance with U.S. GAAP and PCAOB auditing standards.

Through real world examples, the course explores how to assess internal controls, identify fraud risks, and perform risk responsive substantive procedures, including confirmations, cutoff testing, search for unrecorded liabilities, and debt covenant compliance testing. Special emphasis is placed on auditing long term debt arrangements, leases, contingencies, and interest expense analytics, as well as evaluating management’s estimates and documentation.

By the end of this course, participants will be equipped with the audit strategies and professional skepticism needed to confidently audit liabilities and debt while improving overall audit quality and compliance.

Publication Date: May 2026

Designed For
This course is designed for audit professionals responsible for evaluating higher‑risk financial reporting areas involving liabilities and debt.

Topics Covered

• Overview of liability and debt accounting under U.S. GAAP
• Risk assessment considerations for liabilities and debt
• Internal controls over expenditures, accruals, obligations, and financing activities
• Substantive testing techniques: confirmations, cutoff, unrecorded liabilities searches, and debt roll‑forwards
• Auditing interest expense, amortization schedules, and effective interest method
• Evaluating lease obligations and long‑term financing arrangements
• Debt covenant testing and implications for financial reporting
• Fraud risks including concealed liabilities, related‑party debt, and off‑balance‑sheet arrangements
• Documentation expectations and common audit pitfalls

Learning Objectives

• Identify common types of liabilities and debt and explain their related financial reporting requirements under U.S. GAAP
• Identify risks of material misstatement related to existence, completeness, valuation, and classification of liabilities and debt
• Evaluate internal controls over purchasing, accruals, financing arrangements, and debt compliance
• Design and perform substantive audit procedures, including confirmations, cutoff testing, analytical procedures, and searches for unrecorded liabilities
• Explain how to test debt covenant compliance and assess the implications of violations
• Recognize fraud risks and red flags related to liabilities, debt arrangements, and off balance sheet transactions
• Explain how to document audit procedures and conclusions in accordance with professional auditing standards

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Auditing (2 hours)

Program Prerequisites
Basic understanding of auditing

Advance Preparation
None