Assertions used in the New DTT Audit Approach Manual

Practice Aid March 2010 For internal use only

The New DTT Audit Approach Manual moves away from the use of potential errors and uses the assertions that are
set out in the International Standards on Auditing. In representing that the financial statements are in accordance
with the applicable financial reporting framework, management implicitly or explicitly makes assertions regarding
the recognition, measurement, presentation and disclosure of the various elements of financial statements and
related disclosures. Assertions used by us to consider the different types of potential misstatements that may
occur are set out below and have also been linked to the old potential errors.
Assertions
Assertions about classes of
Occurrencetransactions
and events that have been
recorded have occurred and
pertain to the entity

Examples of Potential Misstatements

transactions and events for the period under audit 1:
Potential misstatements for classes of transactions and events
for the period under audit, linked to the assertion occurrence,
may result from:
l Fictitious or unauthorized transactions are entered on
source documents or directly into the application system
(input)
l Transactions are duplicated when input
l Invalid input is captured in the subsidiary ledgers.
Completenessall
Potential misstatements for classes of transactions and events
transactions and events that
for the period under audit, linked to the assertion
should have been recorded
completeness, may result from:
l Transactions or events that are not identified and therefore
have been recorded
are not entered on a source document or directly into the
application system (input)
l Input is not captured into the subsidiary ledgers
l Input that is rejected is not resubmitted for capture in the
subsidiary ledger.
Accuracyamounts and
Potential misstatements for classes of transactions and events
other data relating to
for the period under audit, linked to the assertion accuracy,
recorded transactions and
may result from:
l Input is inaccurately captured into the subsidiary ledgers
events have been recorded
l Input or subsequent processing reflects amounts in excess
appropriately
or less than appropriate amounts
l Processing of transactions is inaccurate (i.e., summarizing,
calculating, and posting)
l Inaccurate adjustments are made to the subsidiary ledgers
or general ledger.
Cutofftransactions and
Potential misstatements for classes of transactions and events
events have been recorded
for the period under audit, linked to the assertion cutoff, may
in the correct accounting
result from:
l Transactions or events that have occurred or will occur are
period
recorded too early (i.e., they are recorded in a period prior
to when they should have been recorded)
l Transactions or events that have occurred are recorded too
late (i.e., they are recorded in a period after the period in
which they should have been recorded).
Classificationtransactions Potential misstatements for classes of transactions and events
for the period under audit, linked to the assertion
and events have been
classification, may result from:
recorded in the proper
l Input is recorded in the incorrect subsidiary ledger or
accounts
general ledger account
l Subsequent processing of a transaction results in it being
reflected in the incorrect subsidiary ledger or general
ledger account.
Assertions about account balances at the period end:
Potential misstatements for account balances at the period
Existenceassets,
end, linked to the assertion existence, may result from:
liabilities, and equity
l An account balance that was previously correctly recorded
interests exist
no longer exists and the sale/adjustment has not been
recorded
l Sale of an asset with no recording of the sale
l Theft of an asset with no recording of the loss.
Potential misstatements for account balances at the period
Rights and obligations
end, linked to the assertion rights and obligations, may result
the entity holds or controls
from:
the rights to assets, and
l The entity no longer having the right to an assets that was
liabilities are the obligations
Deloitte Touche Tohmatsu 2010

Potential
Errors
Validity

Completeness

Recording

Cutoff

Recording

Validity

Validity

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Assertions used in the New DTT Audit Approach Manual

Practice Aid March 2010 For internal use only
Assertions
of the entity

Examples of Potential Misstatements

previously correctly recorded
l The entity no longer having an obligation to settle a
liability that was previously correctly recorded.
Completenessall assets,
Potential misstatements for account balances at the period
liabilities and equity interests end, linked to the assertion completeness, may result from:
l A liability that should have been recorded has not been
that should have been
recorded have been recorded
recorded, e.g., no accrual at period end for certain
liabilities.
Valuation and allocation Potential misstatements for account balances at the period
end, linked to the assertion valuation and allocation, may
assets, liabilities, and equity
result from:
interests are included in the
l Impairments of assets that are not identified and properly
financial statements at
recorded
appropriate amounts and
l Inaccurate adjustments that are made to a account
any resulting valuation or
allocation adjustments are
balance at the period end that inappropriately adjust the
appropriately recorded
value of that account balance
l Assets which are amortized over the incorrect period
resulting in the remaining asset balance being incorrectly
valued
l Fair value adjustments that are not identified and properly
recorded.
Assertions about presentation and disclosure:
Occurrence and rights
Potential misstatements for disclosures, linked to the
and obligationsdisclosed
presentation and disclosure assertions may result from:
l Fictitious or unauthorized disclosures are included in the
events, transactions, and
other matters have occurred
financial statements
l Disclosures of contingent liabilities for which the entity no
and pertain to the entity
longer has an obligation for
Completenessall
l Disclosures that are not identified and therefore are not
disclosures that should have
included in the financial statements
been included in the financial
l Disclosures that are intentionally omitted from the financial
statements have been
statements
included
l The captions in the financial statements result in amounts
Classification and
being presented in a misleading way
understandability
l Input is inaccurately captured into the financial statements
financial information is
l Input into the financial statements reflects amounts in
appropriately presented and
excess or less than appropriate amounts.
described, and disclosures
are clearly expressed
Accuracy and valuation
financial and other
information are disclosed
fairly and at appropriate
amounts.

Potential
Errors

Completeness

Valuation /
Recording

Presentation

Assertions about classes of transactions and events for the period under audit shall be read as being assertions about items
included in the Income Statement.
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