State the evidence, which you, as the auditor, would like to find in place and pay attention to when vouching the following payments made by RR Paper Mills Ltd., during the financial year ended 31 October 2002. A loan amounting to Sh. 30 million obtained from a local bank and secured by the factory building

Loan amounting to Sh.30 million


  •  Go through the board of directors‘ minutes to ensure that the loan was acquired with proper authority from the board.
  • Ensure that the loan was obtained on behalf of R R Paper Mills and not for a third party. To determine this, seek evidence regarding the utilization of the money within the company.
  •  Verify that the loan was utilised for the approved purpose
  • Determine whether the loan is being properly serviced in terms of interest and principal repayments. If no, consider the impact of the consequences of default to R Paper Mills, e.g. sale of the security, possible liquidation (hence no longer a going concern).

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