What it is
Debt is a small number of large items, and the audit reads the same way for each: roll the principal from last year, agree it to the lender, split current from long-term, recompute interest and check covenants. A missed covenant can turn long-term debt into a current liability and raise a going concern question.
This workbook has a rollforward for up to 15 loans with a lender confirmation tie-out and issuance costs netted against the debt, a maturities tab for the next five years that feeds the current portion, an interest and accrued interest recalculation from month-end balances, and a covenant tab that recomputes each ratio and flags a breach.
When to use it
- Auditing notes payable, term loans, mortgages and lines of credit.
- Preparing the debt note maturity table.
- Testing covenant compliance and classification at year end.
What’s inside
- Rollforward by loan, confirmation difference, current and long-term split
- Maturities by year feeding the current portion
- Interest expense and accrued interest recalculation with a reasonableness flag
- Covenant test with pass or breach, headroom and the consequence to evaluate
Standard cited
This template follows AU-C 505 / ASC 470 / ASC 835-30. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 505 explained.
Questions
When must long-term debt be reclassified as current?
When a covenant violation at the balance sheet date makes the debt callable, unless the lender has waived the right to demand repayment for more than a year or it is probable the violation will be cured within the grace period (ASC 470-10-45). Document the lender’s waiver and its terms.
How are debt issuance costs presented?
Costs on a term loan are a direct deduction from the carrying amount of the debt; costs on a line of credit may be shown as an asset (ASC 835-30-45-1A and S45-1). Amortization is interest expense.
Should lenders with zero balances be confirmed?
Yes. A closed account may hide a loan or guarantee, and the confirmation also asks about collateral and covenant status. Track requests on the confirmation control log.
Related templates
- Audit Program: Debt and Equity
- Confirmation Control Log (AU-C 505)
- Going Concern Evaluation Memo (AU-C 570 / ASC 205-40)
- Accrued Expenses Schedule (Excel)
Last updated 11/05/2026. All free templates.