You, PA, have been engaged to audit the financial statements of January Crescent Inc. for the year ended December 31, 20X2. During the year, the company obtained a long-term loan from a local bank. The following are details of this financing agreement:

1. The loan was to be secured by the companys inventory and accounts receivable.
2. The company was to maintain a debt-to-equity ratio not to exceed 2:1.
3. The company was not to pay dividends without permission from the bank.
4. Monthly instalment payments were to commence July 1, 20X2.

In addition, the company also borrowed, on a short-term basis, substantial amounts from the president of the company just prior to the year-end.

Required:

As the auditor of the financial statements, what substantive procedures should you employ in examining the described loans? Do not discuss internal control. Include the relevant assertion(s) and the technique to be used.