Saakshi Steels Ltd. has breached a covenant in its long-term loan agreement on or before the year-end, making the loan repayable on demand, and has not obtained a waiver by the year-end. This primarily affects which aspect of the borrowing that the auditor must verify?

Correct answer: C) Classification of the loan as a current liability

Explanation

Where a covenant breach on or before the reporting date makes a long-term liability payable on demand and no waiver exists at the reporting date, the liability is generally required to be classified as current. The auditor should review loan agreements, compliance with covenants and lender confirmations to ensure correct classification and disclosure.