Appendix IV - RoMM Control Objectives and Control Activities
Appendix IV - RoMM Control Objectives and Control Activities
Appendix IV - RoMM Control Objectives and Control Activities
This appendix also illustrates the risk of material misstatement and the control related to the risk
that is likely to be reflected in the Other Affected Accounts
Material classes of transactions or account balances relevant to the entity may not be included in
this appendix. Therefore, it is critical that users identify the relevant transaction types for each
material class of transaction, account balance, and disclosure for the specific circumstances of
the entity.
Certain example controls illustrated in this appendix may use computer-generated information as
source data. Users should consider the controls related to this computer-generated information
and tailor the control description accordingly.
Certain example controls involve an application control. Users should identify specific controls at
the entity related to application controls and tailor the control description accordingly.
Certain reports relevant to example controls may be electronically generated by an ERP system.
If such reports are generated from an ERP system, users should consider the controls related to
this computer-generated information and tailor the control description accordingly.
Cash/Bank Balances
Cash/Bank balances
Risks of Material
Transaction
Misstatement (What
Type
Could Go Wrong)
Core Risks and Controls
Recording of
Cash receipts:
Cash
Have been recorded
(when there are nonexistent cash
receipts), or have
been improperly
recorded
Have not been
recorded/applied
Are not accurately
recorded.
Recording of
Cash
Assertion(s)
Existence;
Rights and
Obligations
Completeness
Valuation and
Allocation
Example Control(s)
Other Affected
Account(s)
Trade receivables
[Completeness;
Existence; Rights
and Obligations;
Valuation and
Allocation]
AND/OR
Bank statements are reconciled to
the general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
Completeness
Recording of
Cash
Completeness
Trade receivables
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Cash/Bank balances
Transaction
Type
Recording of
Cash
Cash
Disbursements
Risks of Material
Misstatement (What
Could Go Wrong)
Acquisitions of fixed
assets are not recorded.
Assertion(s)
Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation
Existence
Example Control(s)
of existing and terminated bank
accounts reviews the listing of
bank accounts recorded in the
general ledger and the related
account transactions. Any
unusual or omitted accounts are
investigated and resolved on a
timely basis. (Detective)
Bank statements are reconciled to
the general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
Other Affected
Account(s)
AND/OR
Finance personnel analyse
amounts recorded to cash
suspense accounts and prepare
journal entries to correct any
unusual items. Management
reviews and approves the journal
entries and supporting analysis
before the journal entry is
recorded. (Preventative)
A 3-way match process is
performed for fixed assets
purchases that utilise the
purchase order, receiving
document, and vendor invoice.
Once the 3-way match process is
performed and the key terms of
the purchase are agreed to
supporting documentation, a
transaction is posted in the fixed
assets sub-ledger and general
ledger to record the addition.
(Preventative)
Fixed assets
[Completeness]
Trade payables
[Completeness]
AND/OR
Bank statements are reconciled to
the general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
AND/OR
Fixed assets
[Completeness]
Trade payables
[Completeness]
Cash/Bank balances
Transaction
Type
Cash
Disbursements
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Existence;
Rights and
Obligations
Completeness
Valuation and
Allocation
Example Control(s)
Periodic counts of fixed assets
are performed. Selections are
made from the floor and
reconciled to the fixed assets
register, and any differences are
investigated and resolved.
(Detective)
Cash/bank payments are
generated through the ERP
system. The ERP system
automatically records the journal
entry for cash/bank payments to
the trade payables and cash/bank
sub-ledgers.(Preventative)
Other Affected
Account(s)
Fixed assets
[Completeness]
Trade payables
[Completeness]
Trade payables
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Provision for
expenses
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
AND/OR
All manually generated cheques,
including supporting
documentation and the related
journal entry, are reviewed and
approved by finance manager
before the journal entry is
recorded. (Preventative)
Trade payables
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Provision for
expenses
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
AND/OR
Bank statements are reconciled to
the general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
Trade payables
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Provision for
Cash/Bank balances
Transaction
Type
Cash
Disbursements
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Existence;
Rights and
Obligations
Completeness
Valuation and
Allocation
Example Control(s)
Valuation and
Allocation
Recording of
Cash
Non-existent cash on
hand has been recorded.
Other Affected
Account(s)
expenses
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Long-term/shortterm borrowings
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Existence
Long-Term Debt
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Cash/Bank balances
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Recording of
Cash
Valuation and
Allocation
Cash
Disbursements
Existence
Example Control(s)
count of cash on hand.
y(Detective)
On a periodic basis (and without
forewarning) an employee
independent of the employee(s)
who handle cash performs a
count of cash on hand.
(Detective)
Finance personnel record bank
account transactions to the
general ledger on a daily basis;
finance manager reviews
recorded entries and cash
position regularly for unusual
activity and investigates and
resolves issues on a timely basis.
(Preventative)
Other Affected
Account(s)
AND/OR
Cash
Disbursements
Existence;
Rights and
Obligations
Long-term/shortterm borrowings
[Valuation and
Allocation]
AND/OR
On a periodic basis, finance
personnel perform a reconciliation
of the loan register to the general
ledger. Finance Manager reviews
and approves the reconciliation
and any reconciling items are
reviewed and addressed on a
timely basis. (Detective)
Long-term/shortterm borrowings
[Valuation and
Allocation]
Prepaid Expenses
Prepaid Expenses
Risks of Material
Transaction
Misstatement (What
Type
Could Go Wrong)
Core Risks and Controls
Recording
Prepaid expenses are
Prepaid
recorded for which no
Expenses
payment has been made.
Assertion(s)
Existence
Example Control(s)
Other Affected
Account(s)
Recording
Prepaid
Expenses
Expenditures where no
future benefit exists to the
entity are recorded as
prepayments and
deferred on the balance
sheet.
Existence
Other expenses
[Completeness]
AND/OR
Recording
Prepaid
Expenses
Valuation and
Allocation
Other expenses
[Completeness]
Other expenses
[Completeness]
Prepaid Expenses
Transaction
Type
Recording
Prepaid
Expenses
Risks of Material
Misstatement (What
Could Go Wrong)
Expenditures where
future benefits exist for
the entity are incorrectly
recorded as expenses
instead of deferred.
Assertion(s)
Completeness
Example Control(s)
Prepaid expenses and related other
expense accounts are analysed on
a monthly basis and compared to
budget. Explanations are obtained
for any significant variances and
differences. The analysis is
reviewed by senior management.
(Detective)
Invoices for goods or services
received are authorised and
accompanied by appropriate
supporting documentation.
Management reviews supporting
documentation and journal entries
to record prepayments prior to
accounting personnel recording to
the general ledger. (Preventative)
Other Affected
Account(s)
Other expenses
[Completeness]
Other expenses
[Occurrence]
AND/OR
Recording
Prepaid
Expenses
Existence;
Rights and
Obligations
Recording
Prepaid
Expenses
Completeness
Other expenses
[Occurrence]
Other expenses
[Occurrence]
Other expenses
[Occurrence]
Prepaid Expenses
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
(Detective)
Other Affected
Account(s)
AND/OR
Recording
Prepaid
Expenses
Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation
Amortising
Prepaid
Expenses
Amortisation is recorded
in advance of the time
period associated with
the prepaid expense.
Completeness
Other expenses
[Occurrence]
Other expenses
[Completeness]
AND/OR
Amortising
Prepaid
Expenses
Amortisation recorded
does not include all
prepaid items.
Existence;
Rights and
Obligations
Other expenses
[Completeness]
Other expenses
[Occurrence]
Prepaid Expenses
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
entries. (Preventative)
Other Affected
Account(s)
AND/OR
Amortising
Prepaid
Expenses
Amortisation recorded
includes prepaid items
that do not exist.
Completeness;
Rights and
Obligations
Other expenses
[Completeness]
AND/OR
Amortising
Prepaid
Expenses
Valuation and
Allocation
Valuation and
Allocation
Other expenses
[Accuracy]
Prepaid Expenses
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
amount.
Assertion(s)
Example Control(s)
expense accounts. Discrepancies
or unusual activity are investigated
and resolved on a timely basis.
(Detective)
AND/OR
Recording
Prepaid
Expenses
Insurance recoveries
receivable may be
incorrect due to
inappropriate recovery
assumptions [specify
assumptions] used by
management.
Valuation and
Allocation
Other Affected
Account(s)
Trade receivables
Trade receivables
Risks of Material
Transaction
Misstatement (What
Type
Could Go Wrong)
Core Risks and Controls
Recording of
Sales and trade
Sales
receivables are
recorded:
That do not relate to
valid
sales/shipments
At the incorrect
amount
In the incorrect
period.
Recording of
Sales
Side agreements or
credit memos exist that
are not known to
accounting.
Assertion(s)
Existence
Valuation and
Allocation
Existence;
Completeness
Example Control(s)
Invoices are generated only upon
matching the purchase order and
shipping documents, completing a 3way match. The 3-way match process
is performed within an ERP system
that identifies the purchase order and
shipping document and generates an
invoice within established limits.
(Preventative)
Other Affected
Account(s)
Sales
[Occurrence;
Accuracy; Cutoff]
AND/OR
Existence
Sales
[Occurrence;
Accuracy; Cutoff]
Sales
[Occurrence]
AND/OR
Recording of
Sales
Recording of
Sales
Existence
Completeness
Sales
[Occurrence]
Sales
[Occurrence]
Sales
[Completeness]
AND/OR
Management reviews relevant sales,
trade receivables, costs of sales, and
inventory reports related to sales
order entry, shipping/dispatch, and
invoicing; significant, unusual
relationships are monitored and acted
upon. (Detective)
Sales
[Completeness]
Trade receivables
Transaction
Type
Recording of
Sales
Provision for
doubtful trade
receivables
Provision for
doubtful trade
receivables
Provision for
doubtful trade
receivables
Sales Returns
and Credit
Memos
Risks of Material
Misstatement (What
Could Go Wrong)
Trade receivables stated
in the general ledger
does not reconcile to the
trade receivables
records and/or the
reconciliation contains
invalid items.
Assertion(s)
Existence;
Rights and
Obligations;
Valuation and
Allocation;
Completeness
Inappropriate
methodology for
calculating the provision
for doubtful trade
receivables could result
in misstated net
receivables and bad
debt expense.
Provision for doubtful
trade receivables
calculation is based on
inaccurate receivables
aging data.
Valuation and
Allocation
Receivables included in
the provision for doubtful
trade receivables
calculation:
Do not exist or the
entity no longer has
rights to such
receivables
Do not include all
receivables.
Existence
Valuation and
Allocation
Completeness;
Rights and
Obligations
Rights and
Obligations;
Existence
Example Control(s)
Reconciliation is performed between
trade receivables in the general
ledger and trade receivables
subsidiary ledger amounts, and is
then reviewed by finance manager.
Any reconciling items are reviewed
and addressed on a timely basis.
(Detective)
Management reviews the provision for
doubtful trade receivables
methodology, assumptions, and
underlying calculation for
appropriateness on a periodic basis.
(Detective)
The ERP system ages the trade
receivables based on the parameters
established within the ERP system
and this computer-generated
information is used in the calculation
of the provision for doubtful trade
receivables. (Preventative)
The ERP system ages the trade
receivables based on the parameters
established within the ERP system
and this computer-generated
information is used in the calculation
of the provision for doubtful trade
receivables. (Preventative)
AND/OR
Finance Manager reviews the
provision for doubtful trade
receivables methodology,
assumptions, and underlying
calculation for appropriateness on a
periodic basis. (Detective)
All sales returns are logged when
goods received. Return details per the
log are compared to credit notes
issued and recorded to determine that
credit notes are issued in accordance
with company policy. (Detective)
Other Affected
Account(s)
Other expenses
[Accuracy]
Other expenses
[Accuracy]
Revenue from
operations
[Occurrence]
AND/OR
Representations from operations and
sales personnel are obtained
indicating that no verbal or
unrecorded credit memos exist that
have not been reported to finance
manager. (Detective)
Revenue from
operations
[Occurrence]
Trade receivables
Transaction
Type
Sales Returns
and Credit
Memos
Sales Returns
and Credit
Memos
Risks of Material
Misstatement (What
Could Go Wrong)
Credit notes are not
issued and recorded for
goods returned by
customers.
Credit notes are issued
to customers without the
receipt of returned
goods.
Assertion(s)
Existence;
Rights and
Obligations
Completeness
Example Control(s)
All sales returns are logged when
received. Sales return details per the
log are compared to credit notes
issued to determine that credit notes
are issued in accordance with
company policy. (Detective)
All sales returns are logged when
received and the returned goods log
automatically generates the credit
notes. (Preventative)
Other Affected
Account(s)
Revenue from
operations
[Occurrence]
Revenue from
operations
[Completeness]
AND/OR
Sales Returns
and Credit
Memos
Valuation and
Allocation
Revenue from
operations
[Completeness]
Revenue from
operations
[Accuracy]
AND/OR
ERP system validates the amount of
the issued credit note against the
original invoice. Credit notes issued in
excess of the original invoice are
flagged and must be reviewed and
approved by finance manager.
(Preventative)
Revenue from
operations
[Accuracy]
AND/OR
Sales Returns
and Credit
Memos
Valuation and
Allocation
Valuation and
Allocation
Revenue from
operations
[Accuracy]
Revenue from
operations
[Accuracy]
AND/OR
Management performs a retrospective
review supporting the
appropriateness of the methodology
and significant assumptions.
(Detective)
Revenue from
operations
[Accuracy]
Trade receivables
Transaction
Type
Sales Returns
and Credit
Memos
Risks of Material
Misstatement (What
Could Go Wrong)
sufficient support.
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
Existence;
Completeness
Revenue from
operations
[Accuracy]
Revenue from
operations
[Cutoff;
Completeness]
AND/OR
Cash/bank
Receipts
Cash/bank receipts:
Have been recorded
(when there are
non-existent cash
receipts), or have
improperly been
recorded
Have not been
recorded/applied
Are not accurately
recorded.
Completeness
Existence;
Rights and
Obligations
Valuation and
Allocation
Revenue from
operations
[Cutoff]
Cash
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
AND/OR
Bank statements are reconciled to the
general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
Cash
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Sales
[Occurrence]
Existence
Trade receivables
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
The customer master file is reviewed
for ongoing relevance. (Detective)
Recording of
Sales
Existence; Valuation
and Allocation
Revenue from
operations
[Occurrence]
Revenue from
operations
[Occurrence]
AND/OR
The customer master file generates
an exception report listing new and
deleted customers, shipping address
changes, etc., and the report is
reviewed by the credit manager and
controller. (Detective)
Revenue from
operations
[Occurrence]
AND/OR
Recording of
Sales
Existence;
Valuation and
Allocation
Revenue from
operations
[Occurrence]
Revenue from
operations
[Occurrence;
Accuracy]
AND/OR
Recording of
Sales
Valuation and
Allocation
Revenue from
operations
[Occurrence;
Accuracy]
Revenue from
operations
[Accuracy;
Occurrence;
Completeness]
Trade receivables
Transaction
Type
Recording of
Sales
Risks of Material
Misstatement (What
Could Go Wrong)
revenue transaction.
Assertion(s)
Valuation and
Allocation
Example Control(s)
Sales transactions, volumes, and
values are analysed on a monthly
basis and compared to budget.
Explanations are obtained for any
significant variances and differences.
The analysis is reviewed by senior
management. (Detective)
Foreign sales and trade receivables
restatement is prepared by staff
personnel and reviewed/approved by
finance manager. Analysis
reviewed/approved by finance
manager includes supporting
documentation for the translation rate
calculation. (Preventative)
Other Affected
Account(s)
Revenue from
operations
[Accuracy;
Occurrence;
Completeness]
Revenue from
operations
[Accuracy]
AND/OR
Recording of
Sales
Inventory held on
consignment and
subsequently sold has
not been invoiced and
recorded as a sale and
receivable.
Completeness
Revenue from
operations
[Accuracy]
Revenue from
operations
[Completeness]
Inventory
[Existence]
AND/OR
Provision for
Doubtful Trade
receivables
Valuation and
Allocation
Revenue from
operations
[Completeness]
Inventory
[Existence]
Revenue from
operations
[Occurrence]
Trade receivables
Transaction
Type
Provision for
Doubtful Trade
receivables
Provision for
Doubtful Trade
receivables
Provision for
Doubtful Trade
receivables
Risks of Material
Misstatement (What
Could Go Wrong)
Invoices are generated
in excess, individually or
in the aggregate, of
customer credit limits,
which may affect
revenue recognition
criteria being met and
the ultimate write-off of
uncollectible trade
receivables.
Provision for doubtful
trade receivables is
insufficient in reserving
for both unknown but
historically predictable
bad debt and specific
known bad debt.
Management does not
appropriately consider
economic, industry, or
customer financial
considerations in the
calculation of provision
for doubtful trade
receivables.
Other Affected
Account(s)
Revenue from
operations
[Occurrence]
Assertion(s)
Valuation and
Allocation
Example Control(s)
ERP system suspends purchase
orders that individually or aggregately
exceed customer credit limits.
Approval by the credit manager is
required prior to the ERP system
recording the purchase order.
(Preventative)
Valuation and
Allocation
Other expenses
[Accuracy]
Valuation and
Allocation
Other expenses
[Accuracy]
Other expenses
[Accuracy]
Provision for
Doubtful Trade
receivables
Valuation and
Allocation
Write-off of
Uncollectible
trade
receivables
and
adjustments to
the Provision
for Doubtful
debts Account
Completeness;
Rights and
Obligations
Other expenses
[Occurrence]
Trade receivables
Transaction
Type
Write-off of
Uncollectible
trade
receivables
and
adjustments to
the Provision
for Doubtful
debts Account
Recoveries of
Trade
receivable
Sales Returns
and Credit
Notes
Risks of Material
Misstatement (What
Could Go Wrong)
Receivables write-offs
using the direct write-off
method are not
authorised in
accordance with the
established policy and,
as a result, may be
invalid.
Recoveries of trade
receivables previously
written off are improperly
recorded in the
Statement of Profit and
Loss.
Credit notes are issued
at an amount in excess
of the original invoice.
Assertion(s)
Valuation and
Allocation
Example Control(s)
Trade receivables write-offs are
performed by accounting personnel in
accordance with the write-off policy.
Management reviews trade
receivables write-offs for compliance
with the established policy.
(Detective)
Classification
Valuation and
Allocation;
Completeness
Other Affected
Account(s)
Other expenses
[Accuracy]
Other expenses
[Classification]
Revenue from
operations
[Completeness;
Accuracy]
AND/OR
Sales Returns
and Credit
Notes
Valuation and
Allocation
Revenue from
operations
[Completeness;
Accuracy]
Revenue from
operations
[Occurrence]
AND/OR
For customers receiving promotional
allowances or volume discounts,
management periodically analyses
goods returned that may indicate
inappropriate recording of promotional
allowances or volume discounts.
(Detective)
Revenue from
operations
[Occurrence]
Trade receivables
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
Sales Returns
and Credit
Memos
Other
Receivables
Receivables recorded
for insurance recoveries
are recorded:
When the entity
does not have the
right to the
insurance proceeds
or
At an inappropriate
amount as the
insurance
companys
creditworthiness
was not
appropriately
considered.
Valuation and
Allocation
Valuation and
Allocation
Revenue from
operations
[Occurrence]
Revenue from
operations
[Accuracy]
AND/OR
Management performs a retrospective
review supporting the
appropriateness of the methodology
and significant assumptions.
(Detective)
Revenue from
operations
[Accuracy]
AND/OR
Rights and
Obligations
Valuation and
Allocation
Revenue from
operations
[Accuracy]
Inventory
Inventory
Risks of Material
Transaction
Misstatement (What
Type
Could Go Wrong)
Core Risks and Controls
Recording
Inventory and trade
Inventory
payables are recorded
prior to receipt and/or title
transfer of the inventory.
Assertion(s)
Existence; Rights
and Obligations
Example Control(s)
Inventory and trade payables
entries are recorded automatically
by the ERP system upon
matching the purchase order and
goods received note (GRN).
(Preventative)
Other Affected
Account(s)
Trade payables
[Existence;
Rights and
Obligations; ]
AND/OR
Management reviews and
approves the journal entry and
supporting documentation for
inventory and trade payables
recorded for goods not yet
received, but title has transferred
to the entity. (Preventative)
Trade payables
[Existence;
Rights and
Obligations;]
AND/OR
Physical inventory is counted
periodically and discrepancies are
investigated and corrected within
the inventory records. Inventory
records based on the physical
inventory are reconciled to the
general ledger with any
differences being recorded as a
book-to-physical inventory
adjustment. (Detective)
Trade payables
[Existence;
Rights and
Obligations]
AND/OR
Recording
Inventory
Valuation and
Allocation
Trade payables
[Existence;
Rights and
Obligations;]
Trade payables
[Valuation and
Allocation]
Inventory
Transaction
Type
Recording
Inventory
Recording
Inventory
Risks of Material
Misstatement (What
Could Go Wrong)
Inventory and trade
payables are not
recorded upon transfer of
ownership prior to actual
receipt.
Inventory is received and
not recorded in the
inventory system.
Assertion(s)
Completeness
Completeness
Example Control(s)
Management reviews and
approves the journal entry and
supporting documentation for
inventory and trade payables
recorded for goods not yet
received, but title has transferred
to the entity. (Preventative)
Inventory and trade payables
entries are automatically recorded
by the ERP system upon
matching the purchase order and
GRN. (Preventative)
Other Affected
Account(s)
Trade payables
[Completeness]
Trade payables
[Completeness]
AND/OR
Physical inventory is counted
periodically and discrepancies are
investigated and corrected within
the inventory records. Inventory
records based on the physical
inventory are reconciled to the
general ledger with any
differences being recorded as a
book-to-physical inventory
adjustment. (Detective)
Trade payables
[Completeness]
AND/OR
Recording
Inventory
Recording
removal of
Inventory
Completeness;
Existence;
Rights and
Obligations;
Valuation and
Allocation
Completeness
Trade payables
[Completeness]
Cost of Sales
[Occurrence;
Completeness;
Accuracy;
Cutoff;
Classification]
Cost of Sales
[Occurrence]
Inventory
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
Recording
removal of
Inventory
Existence;
Rights and
Obligations
Cost of Sales
[Occurrence]
Cost of Sales
[Completeness]
AND/OR
Recording
removal of
Inventory
Inventory may be
removed from inventory
records and recorded as
a cost of sales upon
shipment prior to transfer
of ownership.
Completeness
Recording
removal of
Inventory
Existence;
Rights and
Obligations;
Completeness
Cost of Sales
[Completeness]
Cost of Sales
[Occurrence]
Cost of Sales
[Cutoff]
Cost of Sales
[Cutoff]
Inventory
Transaction
Type
Recording
removal of
Inventory
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Valuation and
Allocation
Physical
Inventory
Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation
Physical
Inventory
Physical inventory
counts:
Count inventory that
does not exist
Do not include counts
of all inventory
Do not include
consideration of
movement of
inventory during the
physical inventory
Are not valued at the
appropriate cost
Book to physical
adjustments are not
recorded or recorded
Existence
Completeness
Existence;
Completeness
Valuation and
Allocation
Valuation and
Allocation
Example Control(s)
inventory are reconciled to the
general ledger with any
differences being recorded as a
book-to-physical inventory
adjustment. (Detective)
On a periodic basis, accounting
personnel calculate the inventory
cost under the costing method
utilised by the entity. Prior to
recording the journal entry,
management reviews the
calculation, methodology,
significant assumptions used,
supporting documentation, and
the journal entry for accuracy and
proper account classification.
(Preventative)
AND/OR
Cost of sales is recorded and
inventory is relieved automatically
by the ERP system upon
matching the customer sales
order, shipping documents, and
the invoice generated, completing
a 3-way match. (Preventative)
Physical inventory is counted
periodically and discrepancies are
investigated and corrected within
the inventory records. Inventory
records based on the physical
inventory are reconciled to the
general ledger with any
differences being recorded as a
book to physical inventory
adjustment. (Detective)
Physical inventory is counted
periodically, and discrepancies
are investigated and corrected
within the inventory records.
Inventory records based on the
physical inventory are reconciled
to the general ledger, with any
differences being recorded as a
book-to-physical inventory
adjustment. (Detective)
Other Affected
Account(s)
Cost of Sales
[Accuracy]
Cost of Sales
[Accuracy]
Cost of Sales
[Occurrence;
Completeness;
Accuracy]
Cost of Sales
[Occurrence;
Completeness;
Cutoff;
Accuracy ]
Inventory
Transaction
Type
Inventory Held by
Third Parties
Risks of Material
Misstatement (What
Could Go Wrong)
at the incorrect
amount.
Inventory held by a third
party that has been sold
to a final customer has
not been removed from
inventory or recorded as
a cost of sales.
Assertion(s)
Existence; Rights
and Obligations
Inventory Held by
Third Parties
Completeness
Inventory
Valuation
Valuation and
Allocation
Inventory
Valuation
Inventory may be
recorded at the incorrect
cost under the entitys
costing method.
Valuation and
Allocation
Example Control(s)
On a periodic basis, the reports
provided by the third party to the
entity, either directly or by
confirmation, are reviewed and
reconciled to internal records and
used by the entity to relieve
inventory and record cost of
sales.
On a periodic basis, the reports
provided by the third party to the
entity, either directly or by
confirmation, are reviewed and
reconciled to internal records and
used by the entity to relieve
inventory and record cost of
sales.
Physical inventory is counted
periodically, and discrepancies
are investigated and corrected
within the inventory records.
Inventory records based on the
physical inventory are reconciled
to the general ledger, with any
differences being recorded as a
book-to-physical inventory
adjustment. (Detective)
On a periodic basis, accounting
personnel calculate the inventory
cost under the costing method
utilised by the entity. Prior to
recording the journal entry,
management reviews the
calculation, methodology,
significant assumptions used,
supporting documentation, and
the journal entry for accuracy and
proper account classification.
(Preventative)
AND/OR
On a quarterly basis, accounting
personnel compare the costs
automatically calculated by the
ERP system to manually
calculated inventory costs using
the selected costing method for a
sample of inventory items.
(Detective)
AND/OR
Other Affected
Account(s)
Cost of Sales
[Completeness]
Cost of Sales
[Occurrence]
Cost of Sales
[Completeness]
Cost of Sales
[Accuracy]
Cost of Sales
[Accuracy]
Inventory
Transaction
Type
Inventory
Valuation
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Valuation and
Allocation
Example Control(s)
Management meets monthly in
product cost review meeting to
discuss results of operations,
specifically focused on production
cost evaluation including a
comparison of current-period
productions cost to the currentyear budget and prior-period
benchmarks. (Detective)
AND/OR
Changes made to inventory
costing methods are approved by
management before becoming
effective. (Preventative)
Management reviews the new
standard cost analysis and
supporting documentation and
approves changes to standard
costs, including labour and
overhead allocation assumptions,
before the changes are made to
the inventory ERP system.
(Preventative)
Other Affected
Account(s)
Cost of Sales
[Accuracy]
Cost of Sales
[Accuracy]
Cost of Sales
[Accuracy]
AND/OR
Inventory
Valuation
Valuation and
Allocation
Cost of Sales
[Accuracy]
Cost of Sales
[Accuracy;
Classification]
AND/OR
The report logic used to generate
the Cost Variance Report is nonconfigurable by system users.
(Preventative)
AND/OR
Any changes to the Cost Variance
Report parameters or
configuration can only be made
by the System Administrator
Inventory and require approval by
the Corporate Controller,
evidenced by signoff on the
Change Request Form before
becoming effective.
Cost of Sales
[Accuracy;
Classification]
Cost of Sales
[Accuracy;
Classification]
Inventory
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
(Preventative)
Prior to recording the monthly
journal entry to allocate product
cost variances to period-end
inventory, management reviews
the product cost variance
calculation, which includes an
assessment of the methodology,
significant assumptions used,
supporting documentation, and
mathematical accuracy.
(Preventative)
Management reviews and
approves the cost v/s NSR
evaluation prepared by finance
personnel and the resulting
journal entry. (Preventative)
Other Affected
Account(s)
Inventory
Valuation
Valuation and
Allocation
Inventory
Valuation
Inventory may be
recorded at an amount
that exceeds the lower of
cost or net realisable
value (NRV) as the
significant assumptions
[specify assumptions]
utilised in the lower of
cost or NRV analysis are
inappropriate, do not
have a sufficient basis, or
do not have sufficient
support.
The adjustment for lower
of cost or NRV is
recorded in the incorrect
accounting period.
Valuation and
Allocation
Valuation and
Allocation
Cost of Sales
[Cutoff]
Inventory
Valuation
Existence; Rights
and Obligations;
Completeness;
Valuation and
Allocation
Cost of Sales
[Occurrence;
Accuracy;
Completeness]
Inventory
Valuation
In evaluating the
adjustments for obsolete,
slow moving, or excess
inventory:
Managements method
for determining the
E&O (excess and
obsolete) adjustments
is inappropriate or has
not been applied
consistently.
The estimates are
based on assumptions
Cost of Sales
[Accuracy]
Inventory
Valuation
Valuation and
Allocation
Valuation and
Allocation
Cost of Sales
[Accuracy;
Classification]
Cost of Sales
[Accuracy]
Inventory
Transaction
Type
Inventory
Valuation
Inventory
Valuation
Inventory
Valuation
Risks of Material
Misstatement (What
Could Go Wrong)
that are unreasonable,
lack sufficient basis, or
lack sufficient support.
Assumptions used in
estimating E&O
adjustments include:
[specify assumptions].
Obsolete, slow moving, or
excess inventory exists
but no adjustment is
recorded against
inventory and as a
component of cost of
sales.
Assertion(s)
Completeness;
Valuation and
Allocation
Existence;
Valuation and
Allocation
Example Control(s)
Other Affected
Account(s)
Cost of Sales
[Completeness]
Cost of Sales
[Completeness]
Cost of Sales
[Occurrence]
AND/OR
Valuation and
Allocation
Cost of Sales
[Occurrence]
Cost of Sales
[Accuracy]
Inventory
Transaction
Type
Inventory
Valuation
Inventory
Valuation
Inventory Returns
Risks of Material
Misstatement (What
Could Go Wrong)
The adjustment for
obsolete, slow moving, or
excess inventory is
recorded at the incorrect
amount, in the incorrect
general ledger account,
or in the incorrect
accounting period
The adjustment for
obsolete, slow-moving, or
excess inventory stated in
the general ledger does
not reconcile to the
calculation and/or
contains mathematical
errors.
Inventory returned to
suppliers is:
Not removed from the
inventory and trade
payables records
Recorded at the
incorrect amount
Other Affected
Account(s)
Cost of Sales
[Accuracy; Cutoff;
Classification]
Assertion(s)
Valuation and
Allocation;
Completeness;
Existence
Example Control(s)
Management reviews and
approves the excess and
obsolete adjustment calculation
prepared by finance personnel
and resulting journal entry.
(Preventative)
Valuation and
Allocation;
Completeness;
Existence
Cost of Sales
[Occurrence;
Accuracy;
Completeness;
Cutoff;
Classification]
Trade payables
[Existence;
Rights and
Obligations;
Valuation and
Allocation]
Existence;
Rights and
Obligations
Valuation and
Allocation
AND/OR
Inventory Returns
Inventory recorded as
returned to vendors
(removed from the
inventory and trade
payables records) is not
actually returned.
Completeness
Sales Returns
Existence;
Rights and
Obligations
Valuation and
Allocation
Existence;
Completeness
Trade payables
[Existence;
Rights and
Obligations;
Valuation and
Allocation]
Trade payables
[Completeness]
Cost of Sales
[Occurrence;
Accuracy; Cutoff]
Inventory
Transaction
Type
Sales Returns
Risks of Material
Misstatement (What
Could Go Wrong)
Goods returned by
customers are:
Not recorded
Recorded at the
incorrect amount
Recorded in the
incorrect period.
Assertion(s)
Completeness
Valuation and
Allocation
Existence;
Completeness
Example Control(s)
documentation. (Preventative)
AND/OR
Physical inventory is counted
periodically and discrepancies are
investigated and corrected within
the inventory records. Inventory
records based on the physical
inventory are reconciled to the
general ledger with any
differences being recorded as a
book-to-physical inventory
adjustment. (Detective)
Warehouse personnel enter all
goods received into the ERP
system on the date of receipt, and
the ERP system automatically
records an adjustment to the
inventory subsidiary ledger and to
cost of sales in the general
ledger. (Preventative)
Other Affected
Account(s)
Cost of Sales
[Occurrence;
Accuracy; Cutoff]
Cost of Sales
[Completeness;
Accuracy; Cutoff]
AND/OR
All returned goods are logged
when received. On a periodic
basis, return details as per the log
are compared to the inventory
records to verify the returned
inventory is properly recorded in
the inventory sub-ledger, and to
verify cost of sales has been
reduced in the general ledger.
(Detective)
Cost of Sales
[Completeness;
Accuracy; Cutoff]
Cost of Sales
[Occurrence]
Inventory issued on
consignment and not yet
sold is improperly
removed from inventory
and recorded as cost of
sales.
Completeness
Inventory
Transaction
Type
Recording
Inventory
Risks of Material
Misstatement (What
Could Go Wrong)
Inventory held on
consignment and
subsequently sold has
not been invoiced and
recorded as a sale and
receivable.
Assertion(s)
Existence
Example Control(s)
Inventory consignee provides
periodic reporting of consigned
inventory sold to third parties, and
consigned inventory held. These
reports are reviewed and
reconciled to internal records, and
used by the entity to record cost
of sales and relieve inventory.
(Detective)
Consigned inventory is confirmed
and confirmations are reconciled
to inventory records and the
general ledger. Randomly,
consigned inventory is physically
verified by company personnel.
(Detective)
Other Affected
Account(s)
Cost of Sales
[Occurrence]
Cost of Sales
[Completeness]
AND/OR
Recording
Inventory
Completeness
Recording
Inventory
Existence
Recording
Inventory
Cost of Sales
[Completeness]
Cost of Sales
[Occurrence]
Cost of Sales
[Completeness]
Cost of Sales
[Completeness]
AND/OR
On a periodic basis, the inventory
consignee provides the entity
reporting of consigned inventory
sold to third parties and
consigned inventory still held, or
the entity confirms consigned
Cost of Sales
[Completeness]
Inventory
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Inventory
Valuation
Inventory
Valuation
Volume or purchase
discounts from suppliers
are recorded in improper
accounts (e.g., cost of
sales, inventory) or at
incorrect amounts.
Valuation and
Allocation
Existence
Valuation and
Allocation
Example Control(s)
inventory with the consignee.
These reports or confirmations
are reviewed and reconciled to
internal records, and used by the
entity to record cost of sales and
relieve inventory. (Detective)
Intercompany sales are analysed
at period-end to calculate the
amount of intercompany profit in
inventory to be eliminated.
Finance personnel prepare the
journal entry, supporting
documentation, and account
analysis for intercompany profit in
inventory to be eliminated.
Management reviews and
approves the journal entry,
supporting documentation, and
account analysis before the
journal entry is recorded.
On a periodic basis, purchasing
provides the accounting function
with analysis of inventory
purchases related to all supplier
volume/rebate agreements.
Accounting personnel calculate
the estimated volume discount.
Prior to recording the journal
entry, management reviews the
calculation, methodology,
significant assumptions used,
supporting documentation, and
the journal entry for accuracy and
proper classification.
(Preventative)
Other Affected
Account(s)
Cost of Sales
[Occurrence;
Accuracy]
Cost of Sales
[Accuracy;
Classification]
Trade payables
[Valuation and
Allocation]
AND/OR
Management subsequently
compares volume discount cash
received to the recorded volume
discount estimate for accuracy.
Discrepancies are investigated
and corrected, as necessary.
(Detective)
AND/OR
Cost of Sales
[Accuracy;
Classification]
Trade payables
[Valuation and
Allocation]
Inventory
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Physical inventory is counted
periodically and discrepancies are
investigated and corrected within
the inventory records. Inventory
records are reconciled to the
general ledger. (Detective)
Other Affected
Account(s)
Cost of Sales
[Accuracy;
Classification]
Fixed Assets
Fixed Assets
Risks of Material
Transaction
Misstatement (What
Type
Could Go Wrong)
Core Risks and Controls
Disposal of
The sale, disposal, or
Fixed Assets
theft of fixed assets,
including assets held for
sale, has not been
recorded.
Assertion(s)
Existence;
Rights and
Obligations
Example Control(s)
Other Affected
Account(s)
Acquisition of
Fixed Assets
Existence
Rights and
Obligations
Valuation and
Allocation
Acquisition of
Fixed assets
Existence
Other expenses
[Completeness]
Fixed Assets
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
repairs and
maintenance) have been
incorrectly capitalised.
Assertion(s)
Example Control(s)
by finance personnel with
knowledge of the entitys
capitalisation policy. Journal entry
and supporting documentation for
expenditures of a non-capital nature
are reviewed by management prior
to the journal entry being posted.
(Preventative)
Other Affected
Account(s)
AND/OR
Acquisition of
Fixed assets
Acquisitions of fixed
assets are not recorded.
Completeness
Other expenses
[Completeness]
Cash
[Existence]
Trade payables
[Completeness]
AND/OR
Acquisition of
Fixed assets
Subsequent
improvements made to
fixed assets (e.g.,
remodels, additions) are
incorrectly expensed.
Completeness
Cash
[Existence]
Trade payables
[Completeness]
Other expenses
[Occurrence]
AND/OR
Recorded other expenses are
compared to budget regularly;
management investigates and
resolves significant variances.
(Detective)
Other expenses
[Occurrence]
Fixed Assets
Transaction
Type
Depreciating
Fixed assets
Risks of Material
Misstatement (What
Could Go Wrong)
Depreciation expense is:
Calculated using an
inappropriate rate or
using an
inappropriate
methodology
Recorded at the
incorrect amount
Not calculated for all
fixed assets.
Assertion(s)
Valuation and
Allocation
Valuation and
Allocation
Existence
Example Control(s)
Management reviews fixed assets
additions for appropriate
assignment of depreciable lives and
methodology, and performs a
periodic review of depreciable lives
and depreciation methodology for
all fixed assets for ongoing
appropriateness. (Detective)
Depreciation expense is
recorded for assets of a
non-capital nature or for
assets that have been
disposed.
Depreciation and
amortisation
expense
[Accuracy;
Occurrence]
AND/OR
On a periodic basis, management
performs a retrospective analysis of
fixed assets disposals to challenge
the depreciable lives and
methodology being applied to fixed
assets. (Detective)
Depreciating
Fixed assets
Other Affected
Account(s)
Cost of Sales
[Accuracy;
Occurrence]
Completeness
Expenditures of a non-capital
nature are reviewed and approved
by finance personnel with
knowledge of the entitys
capitalisation policy. Journal entry
and supporting documentation for
expenditures of a non-capital nature
are reviewed by management prior
to the journal entry being posted.
(Preventative)
Cost of Sales
[Accuracy;
Occurrence]
Depreciation and
amortisation
expense
[Accuracy;
Occurrence]
Cost of Sales
[Occurrence]
Depreciation and
amortisation
expense
[Occurrence]
AND/OR
Management reviews fixed assets
additions for appropriate
assignment of depreciable lives and
methodology, and performs a
periodic review of depreciable lives
and depreciation methodology for
all fixed assets for ongoing
appropriateness. (Detective)
Fixed assets
Valuation
Existence;
Completeness;
Valuation and
Allocation; Rights
and Obligations
Cost of Sales
[Occurrence]
Depreciation and
amortisation
expense
[Occurrence]
Fixed Assets
Transaction
Type
Fixed assets
Valuation
Risks of Material
Misstatement (What
Could Go Wrong)
Impairment indicators
may exist for fixed
assets, but are not
known to management.
Assertion(s)
Valuation and
Allocation
Example Control(s)
On a periodic basis, accounting and
operations management meet to
assess internal or external factors
that may be indicators of
impairment. (Preventative)
Other Affected
Account(s)
Other expenses
[Completeness]
AND/OR
Management periodically reviews
budgeted versus actual results for
the entity, including its product lines
and segments. The results of this
review are utilised by management
in assessing whether impairment
indicators may be present.
(Detective)
Other expenses
[Completeness]
Long-term/shortterm borrowings
[Existence]
Existence
Other expenses
[Completeness]
AND/OR
Acquisition of
Fixed assets
Completeness
Long-term/shortterm borrowings
[Existence]
Other expenses
[Completeness]
Long-term/shortterm borrowings
[Completeness]
Other expenses
[Occurrence]
Fixed Assets
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Acquisition of
Fixed assets
Valuation and
Allocation
Acquisition of
Fixed assets
Fixed assets
Valuation
Valuation and
Allocation
Fixed assets
Valuation
The valuation
methodology used for
impairment purposes is:
Inappropriate under
the circumstances
Based on underlying
significant
assumptions
[specify
assumptions] that
Existence
Completeness
Valuation and
Allocation
Valuation and
Allocation
Valuation and
Allocation
Example Control(s)
New lease contracts and lease
modifications recorded in the lease
register are periodically reviewed by
management to verify that the lease
has been properly accounted for as
a finance or operating lease.
(Detective)
Operations management
periodically reviews the listing of
CWIP and communicates to
accounting management any CWIP
assets that have been put into
service. (Detective)
CWIP is reviewed by finance
personnel with knowledge of the
entitys capitalisation policy.
Finance personnel consider
whether the assets constructed
qualify for capitalised interest based
on nature of the asset, and amount
of interest incurred in the period,
and calculate the amount of interest
to be capitalised [As per Accounting
Standard 16 Borrowing Costs].
The journal entry and supporting
documentation for capitalised
interest are reviewed by
management prior to the journal
entry being posted. (Preventative)
Financial forecasts are prepared by
finance personnel with an
appropriate level of knowledge of
accounting requirements.
Management (1) reviews the
financial forecast methodology for
appropriateness and consistent
application to other financial
forecasts prepared and (2) reviews,
challenges, and approves the
significant assumptions applied.
(Preventative)
A valuation analysis is performed by
qualified personnel at the entity or
by a qualified third-party appraiser.
The valuation methodology,
significant assumptions, and
underlying data used are reviewed,
evaluated, and approved by
management with appropriate
knowledge of valuation techniques.
(Preventative)
Other Affected
Account(s)
Long-term/shortterm borrowings
[Completeness]
Other expenses
[Occurrence]
Finance Cost
[Occurrence;
Completeness;
Accuracy]
Other expenses
[Accuracy]
Fixed Assets
Transaction
Type
Disposal of
Fixed assets
Disposal of
Fixed assets
Risks of Material
Misstatement (What
Could Go Wrong)
are inappropriate,
lack sufficient basis,
or lack sufficient
support.
The entity incorrectly
records the disposal of
fixed assets for assets
still owned by the entity.
Assertion(s)
Completeness
Valuation and
Allocation
Example Control(s)
Other Affected
Account(s)
Depreciating
Fixed assets
Valuation and
Allocation
Depreciation and
amortisation
expense
[Completeness;
Accuracy;
Classification]
Assertion(s)
Existence
Valuation and
Allocation
Example Control(s)
Finance personnel
periodically reconcile
intangible asset balances to
supporting documentation;
management reviews and
approves the reconciliations,
including supporting
documentation for account
transactions. Unusual
transactions or invalid
reconciling items are
investigated and resolved on
a timely basis and adjusted to
other expense. (Detective)
Other Affected
Account(s)
Other expenses
[Completeness]
AND/OR
Goodwill and
Intangible
Asset Valuation
Existence;
Completeness;
Rights and
Obligations;
Valuation and
Allocation
Existence;
Rights and
Obligations
Completeness;
Rights and
Obligations
Other expenses
[Completeness]
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Goodwill
Valuation
Valuation and
Allocation
Amortisation of
Intangible
Assets
Valuation and
Allocation
Example Control(s)
including in-house legal
counsel, as appropriate, for
existence and completeness.
Discrepancies are
investigated and resolved on
a timely basis and adjusted to
other expense. (Detective)
Finance personnel prepare
documentation with reference
to the applicable accounting
framework and principle
addressing the identification
of the entitys reporting units
and the assets and liabilities
underlying each reporting
unit. The documentation is
reviewed and approved by
management before the entity
performs the goodwill
impairment test.
(Preventative)
On a periodic basis, finance
personnel analyse intangible
assets for the best estimate of
useful lives, and an
amortisation method that
reflects the pattern in which
economic benefits of the
intangible asset are consumed
or otherwise used up.
Management reviews and
approves the analysis and
supporting documentation.
(Preventative)
Other Affected
Account(s)
Depreciation and
amortisation
expense
[Accuracy]
AND/OR
Amortisation of
Intangible
Assets
Amortisation is not
calculated for all recorded
intangible assets.
Existence
On a periodic basis,
management performs a
retrospective analysis of
intangible assets that have
been fully amortised in prior
periods to challenge the
useful lives and methodology
being applied to intangible
assets. (Detective)
Management reviews
intangible asset additions for
appropriate assignment of
useful lives and methodology,
and performs a periodic
review of useful lives and
amortisation methodology for
Depreciation and
amortisation
expense
[Accuracy]
Depreciation and
amortisation
expense
[Completeness]
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Amortisation of
Intangible
Assets
Completeness;
Rights and
Obligations
Goodwill and
Intangible
Asset Valuation
Management uses a
valuation technique that is
inappropriate under the
circumstances or only
utilises a single valuation
technique for
circumstances that indicate
multiple valuation
techniques are appropriate.
Valuation and
Allocation
Goodwill and
Intangible
Asset Valuation
Managements impairment
assessment uses business
and valuation assumptions
that are not based on its
best and most supportable
estimates.
Valuation and
Allocation
Example Control(s)
all intangible assets for
ongoing appropriateness.
(Detective)
Finance personnel
periodically reconcile
intangible asset balances,
and related amortisation, to
supporting documentation;
management reviews and
approves the reconciliations,
including supporting
documentation for account
transactions. Unusual
transactions or invalid
reconciling items are
investigated and resolved on
a timely basis and adjusted to
other expense. (Detective)
Management reviews the
calculations performed and
assumptions used within the
goodwill impairment
assessment for consistency
with commonly accepted
valuation practices, prior-year
assumptions, and publicly
available peer company and
industry information.
(Preventative)
Finance management
reviews the business
assumptions (including the
reporting unit carrying
amounts and assessment
date) for appropriateness
prior to being provided to
managements valuation
expert. (Preventative)
AND/OR
Management from different
areas of the entity meet to
review the forecast for
appropriateness using
historical performance, their
knowledge of the entitys
strategic plans, industry
projections, and peer
company data.
(Preventative)
AND/OR
Other Affected
Account(s)
Depreciation and
amortisation
expense
[Occurrence]
Other expenses
[Accuracy]
Other expenses
[Accuracy]
Other expenses
[Accuracy]
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Management reviews the
calculations performed and
assumptions used within the
goodwill impairment
assessment for consistency
with commonly accepted
valuation practices, prior-year
assumptions, and publicly
available peer company and
industry information.
(Preventative)
Existence;
Completeness
Valuation and
Allocation
Existence
Other Affected
Account(s)
Other expenses
[Accuracy]
Other expenses
[Completeness]
AND/OR
Recording
Intangible
Assets
Internally developed
intangible assets (e.g.,
copyrights, trademarks,
patents) are inappropriately
recorded as expenses.
Completeness;
Valuation and
Allocation
Other expenses
[Completeness]
Other expenses
[Occurrence]
Recording
Intangible
Assets
Recording
Intangible
Assets
Goodwill and
Intangible
Asset Valuation
Disposing
Goodwill and
Intangible
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Valuation and
Allocation
Existence;
Rights and
Obligations
Existence
Completeness
Valuation and
Allocation
Valuation and
Allocation
Existence;
Rights and
Obligations
Example Control(s)
documentation and the
journal entry are prepared by
finance personnel, and
reviewed and approved by
management before the
journal entry is recorded.
(Preventative)
Controls will vary by entity.
Other Affected
Account(s)
Risks of Material
Misstatement (What
Could Go Wrong)
removed from the general
ledger.
Assertion(s)
Example Control(s)
related to business unit
disposals and other
sale/disposal transactions.
Finance personnel prepare a
journal entry, along with
supporting documentation, to
record the sale or disposal.
The journal entry and
supporting documentation are
reviewed by management
before the journal entry is
recorded. (Preventative)
AND/OR
Disposing
Goodwill and
Intangible
Assets
Completeness; Rights
and Obligations;
Valuation and
Allocation
Other Affected
Account(s)
Trade payables
Trade payable
Risks of Material
Misstatement
Class of
(What Could Go
Transaction
Wrong)
Core Risks and Controls
Recording
Payables
Recording
Payables
Recording
Payables
The reconciliation
between the trade
payables sub-ledger
and the general
ledger may contain
invalid reconciling
items, which may
result in a
misstatement of
trade payables.
Amounts recorded
to trade payables
and other expenses
do not relate to
goods or services
received.
Assertion(s)
Completeness
Valuation and
Allocation
Example Control(s)
Trade payables and other expenses
are recorded automatically by the
ERP system upon matching the
purchase order, completed vendor
work order, or GRN. (Preventative)
Other Affected
Account(s)
Other expenses
[Completeness;
Accuracy]
AND/OR
Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation
Existence
Other expenses
[Completeness;
Accuracy]
Other expenses
[Occurrence]
Other expenses
[Completeness;
Accuracy]
AND/OR
Manual journal entries to trade
payables, inventory, or other
expenses, including period-end
payable accruals and supporting
Other expenses
[Occurrence]
Trade payable
Class of
Transaction
Recording
Payables
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Existence; Rights
and Obligations
Example Control(s)
documentation, are reviewed and
approved by management before
the journal entry is recorded.
(Preventative)
Inventory and trade payables
entries are recorded automatically
by the ERP system upon matching
the purchase order and GRN.
(Preventative)
Other Affected
Account(s)
Inventory
[Existence; Rights
and Obligations]
AND/OR
Management reviews and approves
the journal entry and supporting
documentation for inventory and
trade payables recorded for goods
not yet received, but title has
transferred to the entity.
(Preventative)
Inventory
[Existence; Rights
and Obligations]
AND/OR
Recording
Payables
Valuation and
Allocation
Recording
Payables
Acquisitions of fixed
assets are not
recorded.
Completeness
Inventory
[Existence; Rights
and Obligations]
Inventory
[Existence; Rights
and Obligations]
Inventory
[Valuation and
Allocation]
Cash
[Existence]
Fixed assets
Trade payable
Class of
Transaction
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
Once the 3-way match process is
performed and the key terms of the
purchase are agreed to supporting
documentation, a transaction is
posted in the fixed assets subledger and general ledger to record
the addition. (Preventative)
Other Affected
Account(s)
[Completeness]
AND/OR
Recording
Payables
Inventory is received
and not recorded in
the inventory
system.
Completeness
Cash
[Existence]
Fixed assets
[Completeness]
Inventory
[Completeness]
AND/OR
Physical inventory is counted
periodically and discrepancies are
investigated and corrected within
the inventory records. Inventory
records based on the physical
inventory are reconciled to the
general ledger with any differences
being recorded as a book-tophysical inventory adjustment.
(Detective)
Inventory
[Completeness]
AND/OR
Recording
Disbursements
Cash disbursements
are:
Not recorded
Recorded in the
general ledger
Existence;
Rights and
Obligations
Completeness
Valuation and
Inventory
[Completeness]
Cash
[Existence; Rights
and Obligations;
Completeness;
Valuation and
Allocation]
Trade payable
Class of
Transaction
Risks of Material
Misstatement
(What Could Go
Wrong)
when no cash
disbursement
has been made
Recorded at the
incorrect
amount.
Assertion(s)
Allocation
Example Control(s)
(Preventative)
Other Affected
Account(s)
AND/OR
All manually generated cheques,
including supporting documentation
and the related journal entry, are
reviewed and approved by
management before the journal
entry is recorded. (Preventative)
Cash
[Existence; Rights
and Obligations;
Completeness;
Valuation and
Allocation]
AND/OR
Bank statements are reconciled to
the general ledger regularly, and
differences are investigated and
resolved on a timely basis.
(Detective)
Recording Debit
Memos
Recording Debit
Memos
Recording
Payables
Inventory returned to
suppliers is:
Not removed
from the
inventory and
trade payables
records
Recorded at the
incorrect
amount.
Inventory recorded
as returned to
vendors (removed
from the inventory
and trade payables
records) is not
actually returned.
Inventory and trade
payables are not
recorded upon
transfer of
ownership prior to
actual receipt.
Completeness
Existence;
Rights and
Obligations
Valuation and
Allocation
Cash
[Existence; Rights
and Obligations;
Completeness;
Valuation and
Allocation]
Inventory
[Existence; Rights
and Obligations;
Valuation and
Allocation]
AND/OR
Completeness
Inventory
[Existence; Rights
and Obligations;
Valuation and
Allocation]
Inventory
[Completeness]
Inventory
[Completeness]
Trade payable
Class of
Transaction
Recording
Payables
Risks of Material
Misstatement
(What Could Go
Wrong)
The trade payables
balance includes
amounts due to
unauthorised
vendors.
Assertion(s)
Existence
Example Control(s)
New vendors to be added to the
vendor master file are submitted to
the accounting function by
purchasing personnel. New vendors
are independently verified by the
accounting function for
appropriateness and approved by
management before the vendor is
added to the vendor master file.
(Preventative)
Other Affected
Account(s)
AND/OR
Recording
Payables
Foreign trade
payables are
translated using an
incorrect foreign
exchange rate.
Valuation and
Allocation
Recording Debit
Memos
Volume or purchase
discounts from
suppliers are
recorded in improper
accounts (e.g., cost
of sales, inventory)
or at incorrect
amounts.
Valuation and
Allocation
Inventory
[Valuation and
Allocation]
Cost of Sales
[Accuracy;
Classification]
Trade payable
Class of
Transaction
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
calculation, methodology, significant
assumptions used, supporting
documentation, and the journal
entry for accuracy and proper
classification. (Preventative)
Other Affected
Account(s)
AND/OR
Recording Debit
Memos
Completeness;
Rights and
Obligations
Management subsequently
compares volume discount cash
received to the recorded volume
rebate estimate for accuracy.
Discrepancies are investigated and
corrected, as necessary.
(Detective)
The ERP system automatically
records entries to reduce inventory
and trade payables per the subledgers upon matching the goods
return order, shipping document,
and debit memo, completing a 3way match. (Preventative)
Inventory
[Valuation and
Allocation]
Cost of Sales
[Accuracy;
Classification]
Recording
Provision for
expenses
Assertion(s)
Completeness
Valuation and
Allocation
Example Control(s)
On a periodic basis, finance
personnel meet with members of
management (e.g., sales, operational,
human resources, legal counsel) to
discuss developments and/or
changes in the business that may
affect recorded provision for
expenses, or may affect the need to
record an provision for expense.
Finance personnel prepare a journal
entry and supporting documentation,
which are reviewed by management
before the journal entry is recorded.
(Preventative)
On a periodic basis, provision for
expenses are recorded based on an
analysis performed by qualified
personnel at the entity or by a
qualified third-party specialist. The
methodology, significant assumptions,
and underlying data used, as well as
the journal entry, are reviewed,
evaluated, and approved by
management with appropriate
knowledge before the journal entry is
recorded. (Preventative)
Other Affected
Account(s)
Other expenses
[Completeness]
Other expenses
[Accuracy]
AND/OR
Recording
Provision for
expenses
Existence;
Rights and
Obligations
Other expenses
[Accuracy]
Other expenses
[Occurrence]
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
Adjusting
Provision for
expenses
Existence;
Rights and
Obligations
Adjusting
Provision for
expenses
Previously recorded
provision for expenses
are incorrectly reversed
when a liability still
exists.
Completeness;
Rights and
Obligations
Adjusting
Provision for
expenses
Adjustments to
provision for expenses
are recorded in the
general ledger at
Valuation and
Allocation
Other expenses
[Occurrence]
Recording
Disbursements
Risks of Material
Misstatement (What
Could Go Wrong)
incorrect amounts.
Cash disbursements:
Are not recorded
Have not been
relieved from
provision for
expenses
Are recorded in the
general ledger
when no cash
disbursement has
been made
Are recorded at the
incorrect amount.
Assertion(s)
Existence;
Rights and
Obligations
Completeness
Valuation and
Allocation
Example Control(s)
discuss developments and/or
changes in the business that may
affect recorded provision for
expenses, or may affect the need to
record an provision for expense.
Finance personnel prepare a journal
entry and supporting documentation,
which are reviewed by management
before the journal entry is recorded.
(Preventative)
AND/OR
On a periodic basis, management
analyses recorded provision for
expenses for ongoing relevance.
Inconsistencies or discrepancies are
investigated and resolved on a timely
basis. (Detective)
Cash disbursements are generated
through the ERP system. The ERP
system automatically records the
journal entry for cash disbursements
to the provision for expenses and
cash sub-ledgers. (Preventative)
AND/OR
All manually generated cheques,
including supporting documentation
and the related journal entry, are
reviewed and approved by
management before the journal entry
is recorded. (Preventative)
AND/OR
Bank statements are reconciled to the
general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
Other Affected
Account(s)
Cash
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Cash
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Cash
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Valuation and
Allocation
Other expenses
[Accuracy]
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
of the Board of Directors) before the
management bonuses are recorded.
(Preventative)
Other Affected
Account(s)
AND/OR
Recording
Provision for
expenses
Valuation and
Allocation
Other expenses
[Accuracy]
Cost of Sales
[Accuracy]
Other expenses
[Accuracy]
AND/OR
Recording
Provision for
expenses
Accrued compensated
absences are
incorrectly calculated
and recorded (i.e., not
consistent with the
stated human resource
policy).
Valuation and
Allocation
Cost of Sales
[Accuracy]
Other expenses
[Accuracy]
Other expenses
[Accuracy]
AND/OR
On a periodic basis, management
compares actual results with
budgeted and prior-year amounts;
significant and/or unusual differences
are investigated and resolved.
(Detective)
Other expenses
[Accuracy]
Loans/Borrowings
Loans/Borrowings
Risks of Material
Misstatement
Transaction
(What Could Go
Type
Wrong)
Core Risks and Controls
Recording
Loan agreements are
Borrowings
entered into and not
recorded in the
general ledger.
Assertion(s)
Completeness
Example Control(s)
New loan agreements, including
finance leases, or modifications
to existing loan agreements, are
analysed by finance personnel
who prepare the journal entry
and supporting analysis;
management reviews and
approves the journal entry and
supporting analysis before
recording the entry.
(Preventative)
AND/OR
Recording
Borrowings
Valuation and
Allocation
Recording
Borrowings
Loan is recorded
when no borrowing
agreement has been
entered into or for
loan that is not the
loan of the entity.
Existence;
Rights and
Obligations
Other Affected
Account(s)
Loans/Borrowings
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Recording
Borrowings
Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation
Recording
Payments
Existence;
Rights and
Obligations
Recording
Accrued
Interest
Existence;
Rights and
Obligations
Completeness
Valuation and
Allocation
Example Control(s)
management compares
forecasted cash position to
actual; significant and/or unusual
differences are investigated and
resolved. (Detective)
On a periodic basis, finance
personnel perform a
reconciliation of the loan register
to the general ledger.
Management reviews and
approves the reconciliation and
any reconciling items are
reviewed and addressed on a
timely basis. (Detective)
Management with knowledge of
loan agreements, payment
schedules, and other debt terms,
periodically reviews the
transactions within the loan
register. Discrepancies are
investigated and resolved on a
timely basis. (Detective)
Other Affected
Account(s)
Cash
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
AND/OR
Bank statements are reconciled
to the general ledger regularly
and differences are investigated
and resolved on a timely basis.
(Detective)
Finance personnel prepare the
journal entry, supporting
documentation, and account
analysis to record accrued
finance cost. Management
reviews and approves the journal
entry, supporting documentation,
and account analysis before the
journal entry is recorded.
(Preventative)
AND/OR
On a periodic basis, finance
personnel reconcile accrued
interest, to supporting detail.
Management reviews the
reconciliation and supporting
documentation, and unusual
transactions or invalid
reconciling items are
Cash
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Loans/Borrowings
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Recording
Accrued
Interest
Completeness
Recording
Accrued
Interest
Valuation and
Allocation
Example Control(s)
investigated and resolved on a
timely basis. (Detective)
On a periodic basis, finance
personnel meet with members of
management (e.g., sales,
operational, human resources,
legal counsel, Treasury) to
discuss developments and/or
changes in the business that
may affect recorded provision for
expenses, or may affect the
need to record an provision for
expense. Finance personnel
prepare a journal entry and
supporting documentation, which
are reviewed by management
before the journal entry is
recorded. (Preventative)
Finance personnel prepare the
journal entry, supporting
documentation, and account
analysis to record accrued
finance cost. Management
reviews and approves the journal
entry, supporting documentation,
and account analysis before the
journal entry is recorded.
(Preventative)
AND/OR
Spreadsheets utilised to analyse
and calculate significant accrued
finance costs are locked from
formula editing. On a test basis,
finance personnel test the
calculations within the
spreadsheet for ongoing
accuracy. (Detective)
Completeness;
Valuation and
Allocation
Other Affected
Account(s)
Loans/Borrowings
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
Finance personnel prepare the
journal entry to record
intercompany transactions along
with supporting documentation.
Management reviews and
approves the journal entry and
supporting documentation before
the journal entry is recorded.
(Preventative)
AND/OR
Management with knowledge of
intercompany transactions
reviews the activity within the
various intercompany accounts.
Discrepancies or unusual activity
are investigated and resolved on
a timely basis. (Detective)
Recording
Borrowings
Completeness
Fixed assets
[Completeness]
Other expenses
[Occurrence]
AND/OR
Recording
Borrowings
Existence
Fixed assets
[Completeness]
Other expenses
[Occurrence]
Fixed assets
[Existence]
Other expenses
[Completeness]
Loans/Borrowings
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
journal entry and supporting
documentation are reviewed by
management prior to the journal
entry being posted.
(Preventative)
Other Affected
Account(s)
AND/OR
Recording
Borrowings
Finance lease
obligations are
valued and recorded
using the incorrect
interest rate.
Valuation and
Allocation
Recording
Payments
Valuation and
Allocation
Recorded loan
obligations are fully
or partially waived
and the waived
amount is not
recorded in the
general ledger or is
recorded at an
Rights and
Obligations;
Valuation and
Allocation
Recording
Payments
Fixed assets
[Existence]
Other expenses
[Completeness]
Cash
[Existence;
Rights and
Obligations]
AND/OR
On a periodic basis, finance
personnel perform a
reconciliation of the loan register
to the general ledger.
Management reviews and
approves the reconciliation and
any reconciling items are
reviewed and addressed on a
timely basis. (Detective)
Finance personnel prepare the
journal to record loan waiver
along with supporting
documentation. Management
reviews and approves the journal
entry and supporting
documentation before the journal
entry is recorded. (Preventative)
Cash
[Existence;
Rights and
Obligations]
Loans/Borrowings
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
incorrect amount.
Assertion(s)
Example Control(s)
AND/OR
Management with knowledge of
loan agreements, payment
schedules, and other terms,
periodically reviews the activity
within the loan register.
Discrepancies are investigated
and resolved on a timely basis.
(Detective)
Recording of
Other Loan
Related
Transactions
Valuation and
Allocation
Other Affected
Account(s)
Employee Benefits
Employee Benefits
Risks of Material
Transaction
Misstatement (What
Type
Could Go Wrong)
Core Risks and Controls
Measurement
The entity modifies or
of Benefit
terminates existing plans
Obligation
or creates new plans
and the changes are
unknown to
management and the
actuary.
Assertion(s)
Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation
Example Control(s)
On a periodic basis, finance and
human resource personnel meet to
evaluate changes to the entitys
employee benefit plan structure.
Changes made to existing plans or
creations of new plans are provided
to the actuary. Finance personnel
evaluate that changes to the plan
were contemplated by the actuary
when preparing the actuarial report
by reviewing the key plan information
disclosed in the actuarial report and
utilised by the actuary in making the
actuarial calculations. (Preventative)
AND/OR
Measurement
of Benefit
Obligation
Existence;
Completeness;
Valuation and
Allocation
Measurement
of Benefit
Existence;
Completeness;
Other Affected
Accounts
Employee Benefits
Transaction
Type
Obligation
Risks of Material
Misstatement (What
Could Go Wrong)
employee and other data
provided by the entity or
inappropriately makes
changes to the
employee and other data
when performing the
actuarial measurement.
Assertion(s)
Valuation and
Allocation
Example Control(s)
data listed in the report to the data
relating to employees and others
provided to the actuary. Unusual
items or errors are investigated and
corrected on a timely basis.
(Detective)
AND/OR
Recorded employee benefit
obligation adjustments are regularly
compared to budget, current-year
trends, and historical amounts for
unusual relationships; management
investigates and resolves significant
variances. (Detective)
Measurement
of Benefit
Obligation
Measurement
of Benefit
Obligation
In determining the
employee benefit
obligation:
The methodology
used to calculate the
employee benefit
obligation is
inappropriate under
the circumstances.
The underlying
significant
assumptions
[specify
assumptions] are
inappropriate, lack
sufficient basis, or
lack sufficient
support.
The entity
inappropriately relies
upon the findings of the
third-party actuary who
is not adequately
competent or objective.
Valuation and
Allocation
Valuation and
Allocation
Valuation and
Allocation
Other Affected
Accounts
Employee Benefits
Transaction
Type
Recording
Benefit Cost
Transactions
of Plan Assets
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Employee Benefit
obligation adjustments,
including unrecognised
service cost or actuarial
gains and losses, are:
Inaccurately
recorded
Not recorded for all
benefit plans
Recorded for benefit
plans that are not
the obligation of the
entity.
Contributions, benefit
payments, and other
transactions (as
applicable) are made but
are not recorded through
the benefit obligation
account.
Existence;
Rights and
Obligations;
Valuation and
Allocation
Valuation and
Allocation
Completeness;
Rights and
Obligations
Existence;
Rights and
Obligations
Example Control(s)
pending (i.e., open proposals) with
the entity. Management reviews the
analysis and concludes on the
independence and/or objectivity of
the actuary before services are
performed. (Preventative)
Finance personnel prepare journal
entries to record benefit obligation
adjustments, including obtaining
supporting documentation (e.g., the
actuarial report). Management
reviews and approves the journal
entry and supporting documentation
before the entry is recorded.
(Preventative)
AND/OR
Management with knowledge of
benefit obligation adjustments
reviews the transactions in the
benefit obligation-related general
ledger accounts for unusual
transactions. Unusual transactions or
errors are investigated and resolved
on a timely basis. (Detective)
Cash disbursements are generated
through the ERP system. The ERP
system automatically records the
journal entry for cash disbursements
to the benefit obligation account and
cash sub-ledgers. (Preventative)
AND/OR
All manually generated cheques,
including the related journal entry
and supporting documentation, are
reviewed and approved by
management before the journal entry
is recorded. (Preventative)
AND/OR
Activity of Plan
Assets
Contributions, benefit
payments, and other
transactions (as
applicable) are recorded
through the benefit
obligation account that
Completeness;
Valuation and
Allocation;
Rights and
Obligations
Other Affected
Accounts
Salaries &
Wages
[Valuation and
Allocation;
Completeness;
Existence;
Rights and
Obligations]
Salaries &
wages
[Valuation and
Allocation;
Completeness;
Existence;
Rights and
Obligations]
Employee Benefits
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
did not occur.
Assertion(s)
Example Control(s)
AND/OR
All manually generated cheques,
including the related journal entry
and supporting documentation, are
reviewed and approved by
management before the journal entry
is recorded. (Preventative)
AND/OR
Activity of Plan
Assets
Contributions, benefit
payments and other
transactions (as
applicable) made to the
benefit plan are
recorded at an amount
that differs from the
actual amount paid.
Valuation and
Allocation
Completeness
Other Affected
Accounts
Employee Benefits
Transaction
Type
Measurement
of Benefit
Obligation
Activity of Plan
Assets
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Existence;
Rights and
Obligations;
Valuation and
Allocation
Existence;
Rights and
Obligations;
Valuation and
Allocation
Example Control(s)
supporting documentation are
reviewed and approved by
management before the journal entry
is recorded. (Preventative)
Management (1) reviews minutes
from executive, board, audit
committee, and other operational
meetings to identify operational
changes or events that may have an
effect on existing benefit plans and
the entitys financial statements and
(2) communicates the changes or
events to the actuary. (Preventative)
Other Affected
Accounts
Income Taxes
Deferred Taxes
Deferred Taxes
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Other Affected
Accounts
Calculate and
Record Deferred
Income Tax
Assets and
Liabilities
Permanent differences
are:
Incorrectly
classified as timing
differences, and
vice versa
Recorded at the
incorrect amount.
Transactions with a
deferred income tax
impact are not
considered when
calculating deferred tax
balances.
Completeness
Existence;
Completeness
Valuation and
Allocation
Income Tax
Expense
(Benefit)
[Occurrence;
Completeness;
Accuracy]
AND/OR
Tax function obtains supporting
documentation and analyses for
permanent and timing differences in
the general ledger accounts and
independently evaluates and tests the
data for proper inclusion and
completeness. (Preventative)
Income Tax
Expense
(Benefit)
[Occurrence;
Completeness;
Accuracy]
Income Tax
Expense
(Benefit)
[Completeness]
AND/OR
Calculate and
Record Deferred
Income Tax
Assets and
Liabilities
Provision to return
adjustments are not
recorded.
Valuation and
Allocation
Income Tax
Expense
(Benefit)
[Completeness]
Income Taxes
Payable/
Receivable
[Valuation and
Allocation]
Income Tax
Expense
(Benefit)
[Accuracy]
Deferred Taxes
Transaction
Type
Calculate and
Record Deferred
Income Tax
Assets and
Liabilities
Risks of Material
Misstatement (What
Could Go Wrong)
Tax rate applied in
taxable income and
deferred tax calculation
is incorrect.
Assertion(s)
Valuation and
Allocation
Example Control(s)
Deferred taxes calculation and journal
entry to record deferred taxes are (1)
prepared by personnel with sufficient
training and experience and (2)
independently reviewed by
management. (Preventative)
Other Affected
Accounts
Income Tax
Expense
(Benefit)
[Accuracy]
AND/OR
Calculate and
Record Deferred
Income Tax
Assets and
Liabilities
Recent amendments to
the income tax code
are not reflected in the
determination of
income tax expense
and deferred taxes.
Valuation and
Allocation
Income Tax
Expense
(Benefit)
[Accuracy]
Income Tax
Expense
(Benefit)
[Accuracy;
Completeness;
Occurrence]
Income Taxes
Payable/
Receivable
[Valuation and
Allocation;
Completeness;
Existence]
AND/OR
The tax department of the entity
agrees the tax rate utilised in
determining income tax expense to
the enacted rate as per the Income
Tax Act, 1961 and considers whether
there are substantively enacted tax
rates that will affect the balance of
deferred taxes. (Preventative)
Income Tax
Expense
(Benefit)
[Accuracy;
Completeness;
Occurrence]
Income Taxes
Payable/
Receivable
[Valuation and
Allocation;
Completeness;
Existence]
Deferred Taxes
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Calculate and
Record Deferred
Income Tax
Assets and
Liabilities
Valuation and
Allocation
Calculate and
Record Deferred
Income Tax
Assets and
Liabilities
The entitys
assessment that there
is reasonable/virtual
certainty that sufficient
future taxable income
will be available against
which the deferred tax
assets can be realised
is not appropriate.
Valuation and
Allocation
Other Affected
Accounts
Income Tax
Expense
(Benefit)
[Accuracy]
AND/OR
Calculate and
Record Deferred
Income Tax
Assets and
Liabilities
Existence;
Completeness;
Rights and
Obligations;
Valuation and
Allocation
Income Tax
Expense
(Benefit)
[Accuracy]
Income Tax
Expense
(Benefit)
[Occurrence;
Completeness;
Accuracy;
Classification]
AND/OR
Deferred taxes are processed using a
software program. Programs
algorithms, calculations, etc., are
tested by the entity for accuracy. New
releases or updates to the software
are separately tested and
incorporated on a timely basis.
(Preventative)
Income Tax
Expense
(Benefit)
[Occurrence;
Completeness;
Accuracy;
Classification]
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
Existence
Valuation and
Allocation
Other Affected
Accounts
Estimated Advance
income tax payments
made are:
Not recorded
Recorded at
incorrect
amounts.
AND/OR
Bank statements are reconciled
periodically, and reconciling items are
investigated for proper recording in the
general ledger. (Detective)
Calculate and
Record
Provision for
income taxes
or Advance
Taxes
Calculate and
Record
Provision for
income taxes
or Advance
Taxes
Income
tax/deduction/exempt
ion is incorrectly
calculated due to:
Exclusion of valid
tax deductions or
exemptions or
under-recorded
tax deductions or
exemptions
Inclusion of
invalid tax
deductions or
exemptions or
over-recorded
deductions or
exemptions.
Calculation of income
tax
expense/deductions/
exemptions does not
include all
jurisdictions.
Completeness
Valuation and
Allocation;
Completeness
Existence
Income Tax
Expense
(Benefit)
[Accuracy;
Completeness;
Occurrence]
AND/OR
Deductions taken on the prior-year tax
return are reconciled to the currentyear income tax calculation and
significant differences are investigated.
(Detective)
Income Tax
Expense
(Benefit)
[Accuracy;
Completeness;
Occurrence]
Income Tax
Expense
(Benefit)
[Completeness]
AND/OR
Listing of all taxable subsidiaries and
other legal entities affecting income tax
Income Tax
Expense
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
is compared to the income tax
calculation for completeness.
(Detective)
Other Affected
Accounts
(Benefit)
[Completeness]
AND/OR
Calculate and
Record
Provision for
income taxes
or Advance
Taxes
Tax adjustments,
penalties, or interest
resulting from income
tax assessment
orders/appellate
orders are:
Not recorded
Inaccurately
recorded.
Calculate and
Record
Provision for
income taxes
or Advance
Taxes
Calculate and
Record
Provision for
income taxes
or Advance
Taxes
Recent amendments
to the income tax
(domestic or
international) are not
reflected in the
determination of
income tax and
deferred taxes.
Completeness
Valuation and
Allocation
Income Tax
Expense
(Benefit)
[Completeness]
Income Tax
Expense
(Benefit)
[Completeness;
Accuracy]
AND/OR
Valuation and
Allocation
Completeness;
Existence;
Valuation and
Allocation
Income Tax
Expense
(Benefit)
[Completeness;
Accuracy]
Deferred Taxes
[Valuation and
Allocation]
Income Tax
Expense
(Benefit)
[Accuracy;
Completeness;
Occurrence]
Deferred Taxes
[Valuation and
Allocation]
Income Tax
Expense
(Benefit)
[Accuracy]
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
Other Affected
Accounts
AND/OR
The tax department of the entity
agrees the tax rate utilised in
determining income tax to the enacted
rate as per the Income Tax Act, 1961
and considers whether there are
substantively enacted tax rates that
will affect the balance of deferred
taxes. (Preventative)
Income Tax
Expense
(Benefit)
[Accuracy;
Completeness;
Occurrence]
Deferred Taxes
[Valuation and
Allocation]
Income Tax
Expense
(Benefit)
[Occurrence;
Completeness]
Sales, purchases,
and other
transactions with
Associated
enterprises are not at
arms length,
resulting in concern
regarding transfer
pricing matters.
Existence;
Completeness;
Rights and
Obligations
Assertion(s)
Existence
Completeness
Valuation and
Allocation
Example Control(s)
Finance personnel prepare the
journal entry, supporting
documentation, and account
analysis to record subscribed and
paid up share capital. Management
reviews and approves the journal
entry, supporting documentation,
and account analysis before the
journal entry is recorded.
(Preventative)
AND/OR
Management with knowledge of the
entitys share capital transactions
and share capital account activity
reviews the share capital accounts
for unrecorded or inaccurately
recorded transactions. Unusual
activity or errors are investigated
and resolved on a timely basis.
(Detective)
Existence
Issue of Share
Capital
Options/Rights to
purchase shares are
exercised, or shares
are purchased through
an employee stock
option plan, but are:
Not recorded in the
equity accounts
Completeness
Valuation and
Allocation
Other Affected
Account(s)
Share Capital
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Recorded at the
incorrect amount.
Assertion(s)
Example Control(s)
(Preventative)
AND/OR
Bank statements are reconciled to
the general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
Buyback of
Shares
Existence;
Rights and
Obligations
Buyback of
Shares
Completeness
Other Affected
Account(s)
Share Capital
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Distribution of
Dividends
Existence;
Rights and
Obligations
Distribution of
Dividends
Dividends are
distributed but not
recorded.
Existence;
Rights and
Obligations
Assertion(s)
Example Control(s)
Management with knowledge of the
entitys share capital transactions
and share capital account activity
reviews the share capital accounts
for unrecorded or inaccurately
recorded transactions. Unusual
activity or errors are investigated
and resolved on a timely basis.
(Detective)
Finance personnel prepare the
journal entry, supporting
documentation, and account
analysis to record dividends.
Management reviews and approves
the journal entry, supporting
documentation, and account
analysis before the journal entry is
recorded. (Preventative)
Bank statements are reconciled to
the general ledger regularly and
differences are investigated and
resolved on a timely basis.
(Detective)
AND/OR
Distribution of
Dividends
Completeness
Other Affected
Account(s)
Share Capital
Transaction
Type
Distribution of
Dividends
Risks of Material
Misstatement (What
Could Go Wrong)
Dividends are
inaccurately calculated
and recorded.
Assertion(s)
Valuation and
Allocation
Example Control(s)
investigated and resolved on a
timely basis. (Detective)
Finance personnel prepare the
journal entry, supporting
documentation, and account
analysis to record dividends.
Management reviews and approves
the journal entry, supporting
documentation, and account
analysis before the journal entry is
recorded. (Preventative)
AND/OR
Foreign
Currency
Translation
Adjustments
Foreign currency
translation adjustments
are not recorded in the
general ledger.
Existence
Other Affected
Account(s)
Recording of
Sales
Supplementary
agreements or credit
memos exist that are
not known to
accounting.
Assertion(s)
Occurrence
Accuracy
Cutoff
Example Control(s)
Invoices are generated only upon
matching the purchase order and
shipping documents, completing a 3way match. The 3-way match process is
performed within an ERP system that
identifies the purchase order and
dispatch note and generates an invoice
within established tolerances.
(Preventative)
Other Affected
Account(s)
Trade receivable
[Existence;
Valuation and
Allocation;
Completeness]
AND/OR
Occurrence
Trade receivables
[Existence;
Valuation and
Allocation;
Completeness]
Trade receivables
[Existence]
AND/OR
Recording of
Sales
Recording of
Sales
Occurrence
Completeness
Trade receivables
[Existence]
Trade receivable
[Existence]
Trade receivables
[Completeness]
AND/OR
Management reviews relevant sales,
trade receivables, costs of sales, and
inventory reports related to order entry,
dispatch, and invoicing; significant,
unusual relationships are monitored and
acted upon. (Detective)
AND/OR
Trade receivables
[Completeness]
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Recording of
Sales
Classification
Sales Returns
and Credit
Memos
Occurrence
Sales Returns
and Credit
Memos
Occurrence
Example Control(s)
Invoices are generated only upon
matching the purchase order and
dispatch documents, completing a 3way match. The 3-way match process is
performed within an ERP system that
identifies the purchase order and
dispatch note and generates an invoice
within established tolerances.
(Preventative)
Finance personnel review the nature
and type of sale transaction and
appropriate account. Management
reviews the supporting documentation,
and journal entry before the journal
entry is recorded. (Preventative)
All returned goods are logged when
received. Return details per the log are
compared to credit notes issued to
determine that credit notes are issued in
accordance with company policy.
(Detective)
AND/OR
All returned goods are logged when
received and the returned goods log
automatically generates the credit
notes. (Preventative)
All returned goods are logged when
received. Return details per the log are
compared to credit notes issued and
recorded to determine that credit notes
are issued in accordance with company
policy. (Detective)
Other Affected
Account(s)
Trade receivables
[Existence;
Rights and
Obligations]
Trade receivables
[Existence]
AND/OR
Sales Returns
and Credit
Memos
Completeness
Trade receivables
[Existence]
Trade receivables
[Completeness]
AND/OR
All returned goods are logged when
received. Credit notes issued are
compared to the return log to determine
that credits issued are for valid returns.
(Detective)
Trade receivables
[Completeness]
Risks of Material
Misstatement (What
Could Go Wrong)
Credit notes are issued
for the incorrect
amount.
Assertion(s)
Accuracy
Example Control(s)
Credit notes are generated by the ERP
system. Credit pricing information is
obtained from the original sales invoice.
(Preventative)
Other Affected
Account(s)
Trade receivables
[Valuation and
Allocation]
AND/OR
ERP system validates the amount of the
issued credit note against the original
invoice. Credit memos issued in excess
of the original invoice are flagged and
must be reviewed and approved by
management. (Preventative)
Trade receivables
[Valuation and
Allocation]
AND/OR
Sales Returns
and Credit
Memos
Sales Returns
and Credit
Memos
Sales return
transactions occurring
around period-end are
not recorded in the
correct period.
Cutoff
Completeness
Accuracy
Accuracy
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
AND/OR
Management performs a retrospective
review supporting the appropriateness
of the methodology and significant
assumptions. (Detective)
Trade receivables
[Valuation and
Allocation]
AND/OR
Sales returns are analysed on a
monthly basis and compared to budget.
Explanations are obtained for any
significant variances and differences.
The analysis is reviewed by senior
management and taken into
consideration when estimating the sales
return reserve. (Detective)
Returned goods received and credit
memos issued at, before, or after the
end of an accounting period are
scrutinised and/or reconciled to make
certain the sales return is recorded in
the appropriate accounting period.
(Detective)
AND/OR
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Existence;
Completeness]
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Example Control(s)
Manual sales return entries made to the
general ledger are reviewed and
approved by management for proper
inclusion in the correct accounting
period. (Detective)
Other Affected
Account(s)
Trade receivables
[Existence;
Completeness]
Occurrence
Trade receivables
[Existence;
Valuation and
Allocation]
AND/OR
The customer master file generates an
exception report listing new and deleted
customers, shipping address changes,
etc., and the report is reviewed by the
credit manager and controller.
(Detective)
Trade receivables
[Existence;
Valuation and
Allocation]
AND/OR
Recording of
Sales
Occurrence
Trade receivables
[Existence;
Valuation and
Allocation]
Trade receivables
[Existence]
AND/OR
Recording of
Sales
Occurrence;
Accuracy
Trade receivables
[Existence]
Trade receivables
[Existence;
Valuation and
Allocation]
AND/OR
Customers who receive consigned
goods are specifically identified as
consignment customers in the ERP
customer master file. The ERP system
generates a report of invoices to
consignment customers that are
Trade receivables
[Existence;
Valuation and
Allocation]
Recording of
Sales
Risks of Material
Misstatement (What
Could Go Wrong)
Inventory held on
consignment and
subsequently sold has
not been invoiced and
recorded as a sale and
receivable.
Assertion(s)
Completeness
Example Control(s)
scrutinised by management for proper
revenue recognition. (Detective)
Consigned inventory is confirmed and
confirmations are reconciled to
inventory records and the general
ledger. Randomly, consigned inventory
is physically verified by company
personnel. (Detective)
Other Affected
Account(s)
Trade receivables
[Completeness]
AND/OR
Recording of
Sales
Accuracy;
Occurrence
Trade receivables
[Completeness]
AND/OR
Recording of
Sales
Recording of
Sales
Occurrence
Occurrence
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
Risks of Material
Misstatement (What
Could Go Wrong)
Credit notes are issued
at an amount in excess
of the original invoice.
Assertion(s)
Completeness;
Accuracy
Example Control(s)
Policy requires that credit notes are not
issued in amounts in excess of the
original invoice amount; compliance
with this policy is monitored by
management via review of credit
memos prior to issuance.
(Preventative)
Other Affected
Account(s)
Trade receivables
[Valuation and
Allocation;
Completeness]
AND/OR
Sales Returns
and Credit
Memos
Occurrence
Trade receivables
[Valuation and
Allocation;
Completeness]
Trade receivables
[Valuation and
Allocation]
AND/OR
For customers receiving promotional
allowances or volume discounts,
management periodically analyses
goods returned that may indicate
inappropriate recording of promotional
allowances or volume discounts.
(Detective)
Trade receivables
[Valuation and
Allocation]
AND/OR
Sales Returns
and Credit
Memos
Provisions for
promotional allowances
or volume discounts are
not accurately
estimated as a result of:
An inappropriate
methodology
Accuracy
Accuracy
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
Recording of
Sales
Risks of Material
Misstatement (What
Could Go Wrong)
Significant
assumptions
[specify
assumptions] being
inappropriate,
lacking sufficient
basis, or lacking
sufficient support.
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
Management performs a retrospective
review supporting the appropriateness
of the methodology and significant
assumptions. (Detective)
Trade receivables
[Valuation and
Allocation]
AND/OR
Accuracy
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
AND/OR
ERP system calculates the foreign sales
and trade receivables translation, which
is independently verified by
management. (Preventative)
Trade receivables
[Valuation and
Allocation]
Cost of Sales
Cost of Sales
Risks of Material
Misstatement
Transaction
(What Could Go
Type
Wrong)
Core Risks and Controls
Recording
Costs of sales are:
Cost of Sales
Recorded when
no sale exists
Not recorded
when sales exist
Recorded at the
incorrect amount
Recorded in the
incorrect period
Incorrectly
classified.
Recording
Cost of Sales
Recording
Cost of Sales
Inventory may be
removed from
inventory records
and recorded as a
cost of sales when it
has not actually
been sold.
Inventory records
include inventory
that was sold to
customers and not
recorded as a
component of cost
of sales.
Assertion(s)
Occurrence
Completeness
Accuracy
Cutoff
Classification
Example Control(s)
Other Affected
Account(s)
Occurrence
Completeness
Inventory
[Completeness]
Inventory
[Completeness]
Inventory
[Existence;
Rights and
Obligations]
Inventory
[Existence;
Rights and
Obligations]
Cost of Sales
Transaction
Type
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Risks of Material
Misstatement
(What Could Go
Wrong)
Inventory has been
sold that is removed
from the accounts at
incorrect amounts.
Inventory may be
recorded at the
incorrect cost under
the entitys costing
method.
Assertion(s)
Accuracy
Accuracy
Accuracy
Example Control(s)
recorded as a book-to-physical inventory
adjustment. (Detective)
On a periodic basis, accounting
personnel calculate the inventory cost
under the costing method utilised by the
entity. Prior to recording the journal entry,
management reviews the calculation,
methodology, significant assumptions
used, supporting documentation, and the
journal entry for accuracy and proper
account classification. (Preventative)
AND/OR
Cost of sales is recorded and inventory
is relieved automatically by the ERP
system upon matching the customer
sales order, dispatch documents, and the
invoice generated, completing a 3-way
match. (Preventative)
Management reviews the new standard
cost analysis and supporting
documentation and approves changes to
standard costs, including labor and
overhead allocation assumptions, before
the changes are made to the inventory
ERP system. (Preventative)
AND/OR
Management compares the revised
standard cost master file to the approved
standard cost per the New Standard
Cost Report. (Preventative)
On a periodic basis, accounting
personnel calculate the inventory cost
under the costing method utilised by the
entity. Prior to recording the journal entry,
management reviews the calculation,
methodology, significant assumptions
used, supporting documentation, and the
journal entry for accuracy and proper
account classification. (Preventative)
AND/OR
On a quarterly basis, accounting
personnel compare the costs
automatically calculated by the ERP
system to manually calculated inventory
costs using the selected costing method
for a sample of inventory items.
(Detective)
AND/OR
Other Affected
Account(s)
Inventory
[Valuation and
Allocation]
Inventory
[Valuation and
Allocation]
Inventory
[Valuation and
Allocation]
Inventory
[Valuation and
Allocation
Inventory
[Valuation and
Allocation]
Inventory
[Valuation and
Allocation]
Cost of Sales
Transaction
Type
Recording
Cost of Sales
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Cutoff
Example Control(s)
Management meets monthly in product
cost review meeting to discuss results of
operations, specifically focused on
production cost evaluation including a
comparison of current-period productions
cost to the current-year budget and priorperiod benchmarks. (Detective)
AND/OR
Changes made to inventory costing
methods are approved by management
before becoming effective
(Preventative)
Cost of sales is recorded and inventory
is reduced automatically by the ERP
system upon matching the customer
sales order, shipping documents, and the
invoice generated, completing a 3-way
match. (Preventative)
Other Affected
Account(s)
Inventory
[Valuation and
Allocation]
Inventory
[Valuation and
Allocation]
Inventory
[Completeness;
Existence; Rights
and Obligations]
AND/OR
Recording
Cost of Sales
Recording
Cost of Sales
Inventory stated in
the general ledger
does not reconcile to
the inventory
records and/or the
reconciliation
contains invalid
items.
Inventory may be
recorded at an
amount that
exceeds the lower of
cost or NRV as the
significant
assumptions
[specify
assumptions]
utilised in the lower
of cost or NRV
analysis are
inappropriate, do not
have a sufficient
basis, or do not
Occurrence;
Completeness;
Accuracy;
Cutoff;
Classification;
Accuracy
Inventory
[Completeness;
Existence; Rights
and Obligations]
Inventory
[Valuation and
Allocation]
Inventory
[Completeness;
Existence; Rights
and Obligations;
Valuation and
Allocation]
Cost of Sales
Transaction
Type
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Risks of Material
Misstatement
(What Could Go
Wrong)
have sufficient
support.
Assertion(s)
Example Control(s)
Other Affected
Account(s)
The grouping of
inventory for
purposes of applying
the COST V/S NSR
evaluation is
inappropriate for one
or more of the
following reasons:
The grouping
does not reflect
the nature of
inventory
The grouping
does not reflect
how income and
losses impact
the Statement of
Profit and Loss
in the normal
course of
business, and
The grouping is
not applied
consistently
from one period
to the next.
The adjustment for
lower of cost or NRV
is recorded in the
incorrect accounting
period.
Accuracy
Inventory
[Valuation and
Allocation]
Cutoff
Inventory
[Valuation and
Allocation]
Occurrence;
Accuracy;
Completeness
Inventory
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Occurrence
Inventory
[Existence;
Valuation and
Allocation]
Cost of Sales
Transaction
Type
Recording
Cost of Sales
Recording
Cost of Sales
Risks of Material
Misstatement
(What Could Go
Wrong)
recorded against
inventory and as a
component of cost
of sales.
Assertion(s)
Example Control(s)
Other Affected
Account(s)
AND/OR
Obsolete, slow
moving, or excess
inventory exists but
no adjustment is
recorded against
inventory and as a
component of cost
of sales.
Completeness
In evaluating the
adjustments for
obsolete, slow
moving, or excess
inventory:
Managements
method for
determining the
E&O
adjustments is
inappropriate or
has not been
applied
consistently.
The estimates
are based on
assumptions
that are
unreasonable,
lack sufficient
basis, or lack
sufficient
support.
Assumptions
Accuracy
Accuracy
Inventory
[Existence;
Valuation and
Allocation]
Inventory
[Completeness;
Valuation and
Allocation]
Inventory
[Completeness;
Valuation and
Allocation]
Inventory
[Valuation and
Allocation]
Cost of Sales
Transaction
Type
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Risks of Material
Misstatement
(What Could Go
Wrong)
used in
estimating E&O
adjustments
include: [specify
assumptions]
The calculations for
obsolete, slowmoving, or excess
inventory and
related adjustments
are based on
inaccurate inventory
usage/movement
data.
Assertion(s)
Example Control(s)
Other Affected
Account(s)
Accuracy
Inventory
[Valuation and
Allocation]
Accuracy; Cutoff;
Classification
Inventory
[Existence;
Completeness;
Valuation and
Allocation]
Occurrence;
Accuracy;
Completeness;
Cutoff;
Classification
Inventory
[Existence;
Completeness;
Valuation and
Allocation]
Occurrence;
Completeness;
Accuracy
Inventory
[Existence;
Rights and
Obligations;
Completeness;
Valuation and
Allocation]
Physical inventory
counts:
Count inventory
that does not
exist
Do not include
counts of all
inventory
Occurrence
Completeness
Cutoff
Accuracy
Accuracy
Inventory
[Existence;
Completeness;
Valuation and
Allocation]
Cost of Sales
Transaction
Type
Sales Returns
Risks of Material
Misstatement
(What Could Go
Wrong)
Do not include
consideration of
movement of
inventory during
the physical
inventory
Are not valued
at the
appropriate cost
Book to physical
adjustments that
are not recorded
or recorded at
the incorrect
amount.
Inventory returns
from customers are
recorded:
Prior to receipt
At the incorrect
amount
In the incorrect
period.
Assertion(s)
Example Control(s)
Occurrence
Accuracy
Cutoff
Other Affected
Account(s)
Inventory
[Existence;
Rights and
Obligations;
Valuation and
Allocation;
Completeness]
AND/OR
Sales Returns
Goods returned by
customers are:
Not recorded
Recorded at the
incorrect amount
Recorded in the
incorrect period.
Completeness
Accuracy
Cutoff
Inventory
[Existence;
Rights and
Obligations;
Valuation and
Allocation;
Completeness]
Inventory
[Completeness;
Valuation and
Allocation;
Existence]
AND/OR
All returned goods are logged when
received. On a periodic basis, return
details per the log are compared to the
inventory records to verify the returned
inventory is properly recorded in the
Inventory
[Completeness;
Valuation and
Allocation;
Existence]
Cost of Sales
Transaction
Type
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Recording
Cost of Sales
Risks of Material
Misstatement
(What Could Go
Wrong)
Inventory may be
removed from
inventory records
and recorded as a
cost of sales upon
dispatch prior to
transfer of
ownership.
Inventory held by a
third party that has
been sold to a final
customer has not
been reduced from
inventory or
recorded as a cost
of sales.
Inventory held by a
third party and not
yet sold is
improperly reduced
from inventory and
recorded as cost of
sales.
Inventory records
include inventory
that is not in a
saleable condition.
Recording
Cost of Sales
Inventory issued on
consignment and
not yet sold is
improperly reduced
Assertion(s)
Occurrence
Example Control(s)
inventory sub-ledger, and to verify cost of
sales has been reduced in the general
ledger. (Detective)
Management reviews and approves the
journal entry and supporting
documentation for inventory and cost of
goods sold for goods that have been
dispatched prior to transfer of ownership.
(Preventative)
Other Affected
Account(s)
Inventory
[Completeness]
Completeness
Inventory
[Existence;
Rights and
Obligations]
Occurrence
Inventory
[Completeness]
Completeness
Inventory
[Valuation and
Allocation]
Inventory
[Existence;
Valuation and
Allocation]
Occurrence
Accuracy
Occurrence
Inventory
[Completeness]
Cost of Sales
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
from inventory and
recorded as cost of
sales.
Assertion(s)
Example Control(s)
physically verified by company personnel
and reconciled to the inventory records.
(Detective)
Other Affected
Account(s)
AND/OR
Recording
Cost of Sales
Inventory held on
consignment and
subsequently sold
has not been
invoiced and
recorded as a sale
and receivable.
Completeness
Inventory
[Completeness]
Inventory
[Existence]
AND/OR
Recording
Cost of Sales
Inventory held at
offsite locations is
improperly reduced
from inventory and
recorded as cost of
sales.
Occurrence
Recording
Cost of Sales
Inventory records
include inventory
that does not exist
due to shrinkage,
which has not been
recorded as a
component of cost
of sales.
Inventory previously
issued on
consignment that
has been sold to a
third party has not
been relieved from
inventory or
recorded as a cost
of sale.
Completeness
Recording
Cost of Sales
Completeness
Inventory
[Existence]
Inventory
[Existence;
Rights and
Obligations]
Inventory
[Completeness]
Inventory
[Existence]
AND/OR
On a periodic basis, the inventory
consignee provides the entity reporting
of consigned inventory sold to third
Inventory
[Existence;
Rights and
Cost of Sales
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
parties and consigned inventory still
held, or the entity confirms consigned
inventory with the consignee. These
reports or confirmations are reviewed
and reconciled to internal records, and
used by the entity to record cost of sales
and relieve inventory. (Detective)
Other Affected
Account(s)
Obligations]
Recording Other
Expenses
Cutoff
Recording Other
Expenses
Classification
Other Affected
Account(s)
Transaction
Type
Recording Other
Expenses
Occurrence
Other Affected
Account(s)
Trade payable
[Existence]
AND/OR
Recording Other
Expenses
Occurrence
Trade payable
[Existence]
Prepaid Expenses
[Completeness]
AND/OR
Recording Other
Expenses
Accuracy
Prepaid Expenses
[Completeness]
Prepaid
Expenses
[Valuation and
Allocation]
Transaction
Type
Recording Other
Expenses
Other Affected
Account(s)
Prepaid
Expenses
[Valuation and
Allocation]
Prepaid
Expenses
[Completeness]
AND/OR
Recording Other
Expenses
Expenditures where no
future benefit exists to
the entity are recorded
as prepaid expenses
and deferred on the
balance sheet.
Completeness
Prepaid
Expenses
[Completeness]
Prepaid Expenses
[Completeness]
Prepaid
Expenses
[Existence]
AND/OR
Prepaid expenses and related other
expense accounts are analysed on
a monthly basis and compared to
budget. Explanations are obtained
for any significant variances and
Prepaid
Expenses
[Existence]
Transaction
Type
Recording Other
Expenses
Other Affected
Account(s)
Prepaid
Expenses
[Completeness]
AND/OR
Recording Other
Expenses
Amortisation recorded
does not include all
prepaid items.
Occurrence
Recording Other
Expenses
Amortisation recorded
includes prepaid items
that do not exist.
Completeness
Prepaid
Expenses
[Completeness]
Prepaid
Expenses
[Existence;
Rights and
Obligations]
Prepaid
Expenses
[Completeness;
Rights and
Obligations]
Transaction
Type
Recording Other
Expenses
Recording Other
Expenses
Recording Other
Expenses
Recording Other
Expenses
Other Affected
Account(s)
Prepaid
Expenses
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
Trade receivable
[Valuation and
Allocation]
Fixed assets
[Completeness]
AND/OR
Recording Other
Expenses
Completeness
Fixed assets
[Completeness]
Fixed assets
[Existence]
Transaction
Type
Other Affected
Account(s)
AND/OR
Recording Other
Expenses
Recording Other
Expenses
Depreciation expense is
recorded for assets of a
non-capital nature or for
assets that have been
disposed.
Occurrence
Accuracy
Occurrence
Fixed assets
[Existence]
Fixed assets
[Valuation and
Allocation;
Existence]
AND/OR
On a periodic basis, management
performs a retrospective analysis of
fixed assets disposals to challenge
the depreciable lives and
methodology being applied to fixed
assets. (Detective)
Expenditures of a non-capital
nature are reviewed and approved
by finance personnel with
knowledge of the entitys
capitalisation policy. Journal entry
and supporting documentation for
expenditures of a non-capital nature
are reviewed by management prior
to the journal entry being posted.
(Preventative)
Fixed assets
[Valuation and
Allocation
Existence]
Fixed assets
[Completeness]
Cost of Sales
[Occurrence]
Other Expenses
[Occurrence]
AND/OR
Management reviews fixed assets
additions for appropriate
assignment of useful lives and
methodology, and performs a
periodic review of useful lives and
depreciation methodology for all
fixed assets for ongoing
appropriateness. (Detective)
AND/OR
Fixed assets
[Completeness]
Cost of Sales
[Occurrence]
Other Expenses
[Occurrence]
Transaction
Type
Other Affected
Account(s)
Fixed assets
[Completeness]
Cost of Sales
[Occurrence]
Other Expenses
[Occurrence]
Recording Other
Expenses
Intangibles where no
future economic benefit
is expected are recorded
or are recorded in
excess of the asset
amount rather than as
an other expense.
Completeness
Intangible Assets
[Existence;
Valuation and
Allocation]
AND/OR
Recording Other
Expenses
Recording Other
Expenses
Impairment indicators
may exist for recorded
fixed assets, but are not
known to or identified by
management.
Managements
impairment assessment
uses business and
valuation assumptions
that are not based on its
best and most
Completeness
Accuracy
Intangible Assets
[Existence;
Valuation and
Allocation]
Fixed assets
[Valuation and
Allocation]
Fixed assets
[Valuation and
Allocation]
Intangible Assets
[Valuation and
Allocation]
Transaction
Type
Other Affected
Account(s)
AND/OR
Management from different areas of
the entity meet to review the
forecast for appropriateness using
historical performance, their
knowledge of the entitys strategic
plans, industry projections, and
peer company data. (Preventative)
Intangible Assets
[Valuation and
Allocation]
AND/OR
Recording Other
Expenses
Amortisation is not
calculated for all
recorded intangible
assets.
Completeness
Recording Other
Expenses
Amortisation is recorded
for intangible assets that
have been disposed,
fully amortised, or for
which the entity does not
have legal ownership.
Occurrence
Recording Other
Expenses
Accuracy
Intangible Assets
[Valuation and
Allocation]
Intangible Assets
[Existence]
Intangible Assets
[Completeness;
Rights and
Obligations]
Intangible Assets
[Valuation and
Allocation]
Transaction
Type
Other Affected
Account(s)
AND/OR
Recording Other
Expenses
Recording Other
Expenses
Completeness
Accuracy
Occurrence
Intangible Assets
[Valuation and
Allocation]
Trade payable
[Completeness;
Valuation and
Allocation]
Trade payable
[Completeness;
Valuation and
Allocation]
Trade payable
[Completeness;
Valuation and
Allocation]
Provision for
expenses
[Existence;
Rights and
Obligations]
AND/OR
On a periodic basis, finance
personnel reconcile provision for
expenses to supporting detail.
Management reviews the
reconciliation and supporting
Provision for
expenses
[Existence;
Rights and
Obligations]
Transaction
Type
Recording Other
Expenses
Recording Other
Expenses
Other Affected
Account(s)
Provision for
expenses
[Completeness]
Provision for
expenses
[Valuation and
Allocation]
AND/OR
Recording Other
Expenses
Accuracy;
Classification
Provision for
expenses
[Valuation and
Allocation]
Cost of Sales
[Accuracy;
Classification]
Transaction
Type
Completeness
Other Affected
Account(s)
Cost of Sales
[Accuracy;
Classification]
Long-term/shortterm borrowings
[Existence]
Fixed assets
[Existence]
AND/OR
Recording Other
Expenses
Occurrence
Long-term/shortterm borrowings
[Existence]
Fixed assets
[Existence]
Long-term/shortterm borrowings
[Completeness]
Fixed assets
[Completeness]
Transaction
Type
Recording Other
Expenses
Recording Other
Expenses
Recording Other
Expenses
Recording Other
Expenses
Recoveries of
Other Expenses
Recording Other
Expenses
Other Affected
Account(s)
Long-term/shortterm borrowings
[Completeness]
Fixed assets
[Completeness]
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Valuation and
Allocation]
Trade receivables
[Completeness;
Transaction
Type
Recording Other
Expenses
Recoveries of trade
receivables previously
written off are improperly
recorded in the
Statement of Profit and
Loss.
Classification
Recording Other
Expenses
Capital work-in-progress
(CWIP) is not transferred
to fixed assets when the
asset is placed into
service and therefore not
depreciated.
Internally developed
intangible assets (e.g.,
copyrights, trademarks,
patents) are
inappropriately recorded
as expenses.
Completeness;
Accuracy;
Classification
The entity
inappropriately
capitalises costs related
to internally developed
intangible assets rather
than expense such
costs.
Completeness
Recording Other
Expenses
Recording Other
Expenses
Occurrence
Other Affected
Account(s)
Rights and
Obligations]
Trade receivables
[Classification]
Fixed assets
[Valuation and
Allocation]
Intangible Assets
[Completeness;
Valuation and
Allocation]
Goodwill and
Intangible Assets
[Existence]
AND/OR
Recording Other
Expenses
Accuracy
Goodwill and
Intangible Assets
[Existence]
Provision for
expenses
[Valuation and
Allocation]
Cost of Sales
Transaction
Type
Other Affected
Account(s)
[Accuracy]
AND/OR
Management periodically reviews
actual inventory, cost of sales,
gross profit, and other expense
amounts in comparison to budget,
historical amounts, or current-year
trends, and investigates and
resolves any significant variances.
This review is performed at a
sufficient level of detail and
disaggregation (e.g., by type of
product line, type of services).
(Detective)
Recording Other
Expenses
Recording Other
Expenses
Compensated absences
are incorrectly calculated
and recorded (i.e., not
Accuracy
Accuracy
AND/OR
Spreadsheets utilised to analyse
and calculate significant provision
for expenses are locked from
formula editing. On a test basis,
finance personnel test the
calculations within the spreadsheet
for ongoing accuracy. (Detective)
Finance personnel calculate
accrued bonuses based on the
provisions of the bonus program.
Management reviews and approves
the bonus calculation and journal
entry before the journal entry is
recorded. Management bonuses
are reviewed and approved by the
CEO and/or a board of governance
(e.g., Board of Directors,
Remuneration Committee of the
Board of Directors) before the
management bonuses are
recorded. (Preventative)
AND/OR
On a periodic basis, management
compares actual results with
budgeted and prior-year amounts;
significant and/or unusual
differences are investigated and
resolved. (Detective)
On a periodic basis, finance
personnel calculate compensated
absence and prepare the
Provision for
expenses
[Valuation and
Allocation]
Cost of Sales
[Accuracy]
Provision for
expenses
[Valuation and
Allocation]
Provision for
expenses
[Valuation and
Allocation]
Provision for
expenses
[Valuation and
Transaction
Type
Other Affected
Account(s)
Allocation]
Provision for
expenses
[Valuation and
Allocation]
Finance Cost
Finance Cost
Risks of Material
Misstatement
Transaction
(What Could Go
Type
Wrong)
Core Risks and Controls
Recording
Finance cost is
Finance Cost
recorded but does
not exist.
Assertion(s)
Occurrence
Example Control(s)
Finance personnel prepare
the journal entry, supporting
documentation, and
account analysis to record
finance cost. Management
reviews and approves the
journal entry, supporting
documentation, and
account analysis before the
journal entry is recorded.
(Preventative)
AND/OR
Recording
Finance Cost
Completeness
Recording
Finance Cost
Finance Cost is
recorded at incorrect
amounts.
Accuracy
Other Affected
Account(s)
Finance Cost
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Example Control(s)
accrued finance cost.
Management reviews and
approves the journal entry,
supporting documentation,
and account analysis
before the journal entry is
recorded. (Preventative)
AND/OR
Recording
Finance Cost
Cutoff
Spreadsheets utilised to
analyse and calculate
significant accrued finance
costs are locked from
formula editing. On a test
basis, finance personnel
test the calculations within
the spreadsheet for
ongoing accuracy.
(Detective)
Finance Costs at, or after,
period-end are reviewed
and scrutinised by
management for proper
accounting in the proper
period prior to recording.
(Preventative)
AND/OR
Recording
Finance Cost
Classification
Management compares
monthly financial
statements, including
financial metrics, to budget
and prior-year amounts;
significant unusual
relationships are monitored,
investigated, and resolved.
(Detective)
Manual journal entries are
prepared by accounting
personnel, and
management, who
examines the supporting
documentation, makes
certain the journal entry has
been recorded correctly by
the preparer.
(Preventative)
AND/OR
Other Affected
Account(s)
Finance Cost
Transaction
Type
Risks of Material
Misstatement
(What Could Go
Wrong)
Assertion(s)
Occurrence
Completeness
Accuracy
Example Control(s)
Management compares
monthly financial
statements, including
financial metrics, to budget
and prior-year amounts;
significant unusual
relationships are monitored,
investigated, and resolved.
(Detective)
CWIP is reviewed by
finance personnel with
knowledge of the entitys
capitalisation policy.
Finance personnel consider
whether the assets
constructed qualify for
capitalised interest based
on the nature of the asset
and the amount of interest
incurred in the period, and
calculate the amount of
interest to be capitalised.
The journal entry and
supporting documentation
for capitalised interest are
reviewed by management
prior to the journal entry
being posted.
(Preventative)
Other Affected
Account(s)
Journal Entries
Journal Entries
Transaction
Type
Capturing and
processing
routine
information
Risks of Material
Misstatement (What
Could Go Wrong)
There is a mismatch
between sub- ledger and
General Ledger
Capturing and
processing nonroutine
information
The appropriate
accounting treatment is
not specified for each
non-routine event,
transaction, and account
balance.
Assertion(s)
Balance Sheet:
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Example Control(s)
Other Affected
Account(s
Journal Entries
Transaction
Type
Capturing and
processing nonroutine
information
Risks of Material
Misstatement (What
Could Go Wrong)
There is no evaluation of
each non-routine event
or transaction.
Capturing and
processing nonroutine
information
There is no relevant,
sufficient, and reliable
data to record, process,
and report each nonroutine event.
Capturing and
Assertion(s)
Balance Sheet:
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Example Control(s)
Other Affected
Account(s
Journal Entries
Transaction
Type
processing nonroutine
information
Risks of Material
Misstatement (What
Could Go Wrong)
accounting policies to
each non-routine event
or transaction is not
performed on a timely
basis and appropriately
documented.
Capturing and
processing nonroutine
information
Capturing and
processing non-
There is no independent
review of application of
Assertion(s)
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Example Control(s)
Other Affected
Account(s
Journal Entries
Transaction
Type
routine
information
Risks of Material
Misstatement (What
Could Go Wrong)
the entity's accounting
policies to each nonroutine event or
transaction for
appropriateness and
absence of bias by an
individual with the
appropriate level of
authority and
experience.
Capturing and
processing nonroutine
information
Capturing and
processing nonroutine
Assertion(s)
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Completeness,
Example Control(s)
Other Affected
Account(s
Journal Entries
Transaction
Type
information
Risks of Material
Misstatement (What
Could Go Wrong)
approved by
management.
Capturing and
processing nonroutine
information
Capturing and
processing nonroutine
information
Assertion(s)
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Completeness,
Rights and
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Balance Sheet:
Existence,
Completeness,
Rights and
Example Control(s)
Other Affected
Account(s
Journal Entries
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
judgements
Assertion(s)
Obligations,
Valuation and
Allocation
Statement of
Profit and
Loss:
Occurrence,
Completeness,
Accuracy Cutoff,
Classification
Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and
Understandability,
Accuracy and
Valuation
Example Control(s)
Other Affected
Account(s
Financial Reporting
Financial Reporting
Transaction
Type
Defining the
Financial
Closing and
Reporting
Process
Defining the
Financial
Closing and
Reporting
Process
Risks of Material
Misstatement (What
Could Go Wrong)
There is no appropriate
documented process
with respect to financial
closing and reporting,
including the
identification and
updating of internal and
external financial
reporting requirements
and deadlines.
There is no appropriate
documented process
with respect to financial
closing and reporting,
including the
identification and
updating of internal and
external financial
reporting requirements
and deadlines.
Assertion(s)
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Example Control(s)
Management establishes a welldefined process for financial
reporting based on the specific
characteristics of the entity. The
process and its overall timing,
methodology, format and frequency
of analysis are formally
documented, approved, and
reviewed on a regular basis.
(Preventative)
Corporate accounting policies and
procedures, standard charts of
accounts and related guidance are
appropriately created and updated
on a regular basis and distributed to
subsidiaries.
Knowledgeable personnel monitor
changes in authoritative guidance
and regulations (e.g.: Companies
Act, Accounting Standards, Income
Tax Act etc.) that affect the entity
and make the appropriate changes
to the entity's corporate accounting
policies and procedures on a timely
basis.
Management and personnel
involved in the financial closing
identify all applicable generally
accepted accounting principles
affecting the entity and ensure that
entity's accounting policies reflect
the most recent, applicable
authoritative guidance (e.g.:
Companies Act, Accounting
Standards, Income Tax Act etc.)
which are properly documented and
communicated to achieve
consistency across business units
and accounting periods.
Defining the
Financial
Closing and
Reporting
Process
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
(Preventative)
Processes and policies are
established and documented
regarding the requirements for
entity personnel to timely
communicate to the financial
reporting department, information
related to events and transactions
Other Affected
Account(s
Financial Reporting
Transaction
Type
Defining the
Financial
Closing and
Reporting
Process
Risks of Material
Misstatement (What
Could Go Wrong)
not sufficiently
documented, and
updated on a timely
basis.
Defining the
Financial
Closing and
Reporting
Process
Defining the
Financial
Closing and
Reporting
Process
Roles and
responsibilities in the
financial closing and
reporting process are
not clearly defined,
documented, updated,
and not communicated
to appropriate
departments and
individuals on a timely
basis.
Individuals in financial
reporting roles do not
have the necessary
understanding of the
organisations
operations and
appropriate accounting
knowledge to properly
perform their assigned
responsibilities.
When alternative
accounting treatments
are available for a
significant event or
transaction, the
decisions on which
treatments to select are
not documented,
approved by
management, and are
not communicated to the
audit committee.
Assertion(s)
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Example Control(s)
affecting financial reporting,
including significant contracts and
agreements. The compliance with
communication processes and
policies is monitored on a regular
basis.
(Preventative)
Changes to the entity's financial
closing and reporting process (e.g.,
changes to the chart of accounts,
including addition and deletion of
general ledger accounts) are
monitored; any significant change is
independently reviewed and
approved.
(Detective)
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Evaluations of alternative
accounting treatments for significant
events and transactions are
documented and approved by
management. Alternative
accounting treatments selected
(including those related to critical
accounting policies) for significant
events and transactions are
communicated to the Audit
Committee on a timely basis in
accordance with applicable laws
and regulations.
Other Affected
Account(s
Financial Reporting
Transaction
Type
Defining the
Financial
Closing and
Reporting
Process
Risks of Material
Misstatement (What
Could Go Wrong)
General policies are not
established and
documented regarding
permissible overrides of
existing policies and
procedures for the
financial closing and
reporting process.
Assertion(s)
Defining the
Financial
Closing and
Reporting
Process
Capturing and
processing NON
routine
information
Capturing and
processing NON
routine
information
The appropriate
accounting treatment is
not specified for each
non-routine event,
transaction, and account
balance, including those
requiring the use of
accounting estimates
and judgment in the
selection and application
of accounting principles.
Relevant, sufficient, and
reliable data necessary
to record, process, and
report each non-routine
event or transaction is
not captured.
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Example Control(s)
(Detective)
Other Affected
Account(s
Financial Reporting
Transaction
Type
Capturing and
processing NON
routine
information
Risks of Material
Misstatement (What
Could Go Wrong)
There are no procedures
to ensure all postings
have occurred in the
correct period.
Capturing and
processing NON
routine
information
Significant estimates
and judgments are not
well determined and
have sufficient
supporting
documentation.
Capturing and
processing NON
routine
information
Capturing and
processing NON
routine
information
There is no independent
review of application of
the entity's accounting
policies to each nonroutine event or
transaction for
appropriateness and
absence of bias by an
individual with the
appropriate level of
authority and
experience.
Assertion(s)
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Validity,
Recording,
Example Control(s)
When using computerised systems,
the access rights to open and close
financial periods is adequately
restricted to prevent late entries
from posting without appropriate
management review after the books
are closed.
(Preventative)
Other Affected
Account(s
Financial Reporting
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
Cutoff
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
ledger.
(Detective)
All sources of
information for routine
and non-routine events
and transactions are not
identified and analysed.
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Performing the
Accounting
Period Close
Example Control(s)
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
Other Affected
Account(s
Financial Reporting
Transaction
Type
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
Risks of Material
Misstatement (What
Could Go Wrong)
There are no
reconciliations for all
significant accounts and
no independent review
of such reconciliation.
All required analysis are
not prepared accurately
and consistently in
accordance with the
entity's defined financial
closing process.
There are no
reconciliations for all
significant accounts and
no independent review
of such reconciliation.
All required analysis are
not prepared accurately
and consistently in
accordance with the
entity's defined financial
closing process.
All intercompany
transactions and
balances are not
identified, reconciled,
and appropriately
eliminated in
consolidation in the
appropriate accounting
period.
All required analysis are
not prepared accurately
and consistently in
accordance with the
entity's defined financial
closing process.
Performing the
Accounting
Period Close
Assertion(s)
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Example Control(s)
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
Other Affected
Account(s
Financial Reporting
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
All trial-balance
accounts are not
appropriately and
consistently grouped for
presentation in the
financial statements for
accounting periods
presented.
Performing the
Accounting
Period Close
All trial-balance
accounts are not
appropriately and
consistently grouped for
presentation in the
financial statements for
accounting periods
presented.
Performing the
Accounting
Period Close
Assertion(s)
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
Example Control(s)
reclassify amounts into the
appropriate general ledger account
are prepared and reviewed as part
of this process.
(Detective)
The underlying cause for significant
suspense items is investigated,
assessed, and appropriately
resolved. Appropriate changes to
the financial-reporting process are
made to address the underlying
cause for significant suspense
items.
(Detective)
Other Affected
Account(s
Financial Reporting
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
software which may
compromise the integrity
of financial data
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close
Performing the
Accounting
Period Close Consolidation &
Reporting
Assertion(s)
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
Example Control(s)
profiles.
(Preventative)
Other Affected
Account(s
Financial Reporting
Transaction
Type
Performing the
Accounting
Period Close Consolidation &
Reporting
Risks of Material
Misstatement (What
Could Go Wrong)
Consolidation packages
received from
subsidiaries do not
accurately reflect the
underlying financial
records at each
subsidiary.
Assertion(s)
valuation
Performing the
Accounting
Period Close Consolidation &
Reporting
Consolidation packages
received from
subsidiaries do not
accurately reflect the
underlying financial
records at each
subsidiary.
Performing the
Accounting
Period Close Consolidation &
Reporting
Performing the
Accounting
Period Close Consolidation &
Reporting
All trial-balance
accounts are not
appropriately and
consistently grouped for
presentation in the
financial statements for
all accounting periods
presented.
Entries recorded directly
to the financial
statements are not valid.
Entries recorded directly
to the financial
statements are not valid.
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
Example Control(s)
generally accepted accounting
principles, if any should also be
evaluated for any
inclusions/exclusions to be made to
the subsidiary listing Subsidiaries
and other entities included in the
consolidation during the
consolidation process are
compared to this master list of
subsidiaries.
(Detective)
Internal audit (or other suitably
qualified individuals) on a test basis,
verifies the accuracy of financial
reporting package contents by
comparing reporting package
amounts with the subsidiary
records.
(Detective)
Other Affected
Account(s
Financial Reporting
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Preparing and
reviewing
financialstatement
disclosures
All necessary
disclosures in draft
financial-statement are
not made.
Preparing and
reviewing
financialstatement
disclosures
All necessary
disclosures in draft
financial-statement are
not made.
Preparing and
reviewing
financialstatement
disclosures
All necessary
disclosures in draft
financial-statement are
not made.
Assertion(s)
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Example Control(s)
statements are (1) tracked and
recorded in the general ledger on a
timely basis and (2) properly
included in subsequent accounting
periods.
(Detective)
The entity uses up-to-date
disclosure checklists (or other
suitable mechanisms) to ensure
that all relevant financial information
is disclosed (1) appropriately in
accordance with generally accepted
accounting principles and the
entity's accounting and disclosure
policies and (2) in the appropriate
accounting period. Management
ensures that all personnel preparing
and reviewing disclosures receive
the relevant checklists and
instructions to perform their
assigned duties in accordance with
the entity's disclosure policies.
(Preventative)
An independent review of the
financial statements and all related
disclosures using a generally
accepted accounting principles
financial statement presentation
and disclosure checklist (or other
suitable mechanisms) is performed
by management, the disclosure
committee, or other suitably
qualified personnel to review the
draft financial statements and
related disclosures as a whole for
completeness, consistency across
accounting periods, and compliance
with generally accepted accounting
principles and the entity's
accounting and disclosure policies.
(Detective)
Management establishes processes
to ensure that all required
disclosure analysis are prepared
and reviewed on a timely basis.
Such review consists of whether
disclosures are prepared using the
appropriate assumptions and
methodology, and whether
disclosures are properly presented
Other Affected
Account(s
Financial Reporting
Transaction
Type
Risks of Material
Misstatement (What
Could Go Wrong)
Preparing and
reviewing
financialstatement
disclosures
All necessary
disclosures in draft
financial-statement are
not made.
Preparing and
reviewing
financialstatement
disclosures
Preparing and
reviewing
financialstatement
disclosures
Each financial-statement
disclosure is not
prepared in accordance
with generally accepted
accounting principles
(including relevant
regulatory rules) and the
entity's accounting and
disclosure policies.
Each financial-statement
disclosure is not
prepared in accordance
with generally accepted
accounting principles
(including relevant
regulatory rules) and the
entity's accounting and
disclosure policies.
Assertion(s)
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
Example Control(s)
in accordance with generally
accepted accounting principles and
the entity's accounting and
disclosure policies. Management
receives the appropriate reporting
packages, sign-offs, and
representations from business units
to ensure all relevant information
has been disclosed.
(Detective)
A list of all sources of event and
transaction information or other
suitable mechanism is used and
communicated to appropriate
personnel to ensure the
completeness of disclosed
information. Management, the
disclosure committee, or other
suitably qualified personnel are
involved, as considered necessary,
in analysing the effect of event and
transaction information on the
financial-statement disclosures.
(Preventative)
For each financial-statement
disclosure, a supporting analysis is
prepared and documented by
knowledgeable personnel in
accordance with relevant generally
accepted accounting principles
(including relevant regulatory rules)
and the entity's accounting and
disclosure policies. An entityspecific checklist, a generally
accepted accounting principles
disclosure checklist, or other
suitable mechanism is used to
ensure each disclosure is valid,
complete, and appropriately
presented in the appropriate
accounting period.
(Preventative)
If third parties assist in the
preparation of financial-statement
disclosure information,
knowledgeable personnel reviews
the information prepared by the
third party for reasonableness and
consistency with the entity's
business and prior-period
information. All issues identified
through the review are resolved
Other Affected
Account(s
Financial Reporting
Transaction
Type
Reviewing and
approving the
financial
statements
Reviewing and
approving the
financial
statements
Reviewing and
approving the
financial
statements
Reviewing and
approving the
financial
Risks of Material
Misstatement (What
Could Go Wrong)
Assertion(s)
valuation
Each financial-statement
disclosure is not
prepared in accordance
with generally accepted
accounting principles
(including relevant
regulatory rules) and the
entity's accounting and
disclosure policies.
Each financial-statement
disclosure is not
prepared in accordance
with generally accepted
accounting principles
(including relevant
regulatory rules) and the
entity's accounting and
disclosure policies.
Each financial-statement
disclosure is not
prepared in accordance
with generally accepted
accounting principles
(including relevant
regulatory rules) and the
entity's accounting and
disclosure policies.
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
Example Control(s)
prior to the disclosure information
being included in the reports
released to the public and filed with
regulatory agencies.
(Detective)
Management and those responsible
for oversight of the financial closing
and reporting process review the
draft financial statements and
related disclosures to be included in
external reports prior to their
release to the public. The review
consists of analysing the draft
financial statements and related
disclosures and raising challenging
questions. After any issues or
questions raised have been
resolved, the financial statements
and related disclosures are
approved by the board of directors
or audit committee; such approval is
documented.
(Detective)
Management and the audit
committee or board of directors are
briefed by senior financial reporting
personnel on a regular basis and at
each period end for which financial
statements are released to the
public. Such briefing includes a
discussion of key estimates and
judgments, significant non-routine
events and transactions, selection
and application of critical
accounting policies, areas with
unusual fluctuations, and other
relevant significant issues.
(Detective)
Management accumulates and
tracks issues and concerns
identified as part of the review of
the external reports for each periodend financial closing and reporting
process and follows up on a timely
basis to verify that items have been
properly resolved in the appropriate
accounting period and prior to the
release of the reports to the public.
(Detective)
The financial statements and
related disclosures, in print and
electronic form, are reconciled to
Other Affected
Account(s
Financial Reporting
Transaction
Type
statements
Risks of Material
Misstatement (What
Could Go Wrong)
free from publishing,
printing, or electronicconversion errors.
Reviewing and
approving the
financial
statements
Assertion(s)
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Completeness
Occurrence
and rights and
obligations
Classification
and
understandabili
ty
Accuracy and
valuation
Example Control(s)
the approved financial statements,
trial balance, and supporting
information prior to final publishing,
printing, or electronic submission.
(Detective)
Other Affected
Account(s