# Audit of Trade Payables and Other Current Liabilities
## Why Liabilities Matter as Much as Assets
Verification of liabilities is as important as verification of assets. If a liability is omitted or overstated, the Balance Sheet does not show a true and fair view of the state of affairs. The bias in liabilities is typically toward understatement (to look more solvent), so audit risk runs in the opposite direction from assets.
## Classification — Current vs Non-Current
A liability is current if:
- It is held primarily for the purpose of being traded, AND
- Is due to be settled within twelve months after the reporting period.
## Audit Procedures
For existence, direct confirmation, completeness, and valuation, the procedures mirror those for Trade Receivables — sample selection, third-party confirmations, vendor statement reconciliations, search for unrecorded liabilities (review post-YE payments).
## Disclosure — Trade Payable Ageing Schedule
Ageing is measured from the due date of payment and split between MSME and Others, with a separate disputed/undisputed bifurcation:
| Particulars | < 1Y | 1–2Y | 2–3Y | > 3Y | Total |
|---|---|---|---|---|---|
| MSME | |||||
| Others | |||||
| Disputed Dues — MSME | |||||
| Disputed Dues — Others |
## Why the MSME Split?
Under the MSMED Act, 2006, MSME suppliers must be paid within 45 days. Disclosure of MSME-wise ageing highlights non-compliance and exposes interest liability for delayed payments.
## Note on Ageing Buckets
Unlike trade receivables (which start with <6M), trade payables ageing starts with <1Y as the first bucket — a frequently confused point.