The Client May Use a Variety of Methods to Understate

The client may use a variety of methods to understate liabilities,interest expense and long-term debt.These include

A) Recording operating leases as capital leases to avoid putting the liability on the balance sheet.
B) Designing off-balance sheet debt agreements with the sole purpose of keeping the debt off the books of the company.
C) Failing to disclose loan covenants on long-term agreements.These loan covenants may restrict dividend payments or limit the amount of additional debt taken on by the company.
D) Failing to disclose special arrangements,such as transactions with special purpose entities.
E) Failing to disclose non related-party transactions.