March / June 22 Description of Audit Risk 3
In order to finance this purchase, Esk Co obtained an interest-bearing bank loan of $2.5m during the year. The bank loan is payable in five equal annual instalments, with the first instalment due to be paid on 1 September 20X5
Describe The Audit Risk
Esk Co has borrowed $2·5m from the bank under a five‑year loan.
If the loan is not allocated correctly between non‑current and current liabilities, this would lead to a classification error with liabilities being misstated.