8/18/2019 Assertions - Practice Aid - March 2010

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 Assertions used in the New DTT Audit Approach Manual –

 Practice Aid – March 2010 – For internal use only 

© Deloitte Touche Tohmatsu 2010 Page 1 of 2

The New DTT Audit Approach Manual moves away from the use of potential errors and uses the assertions that areset 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 regardingthe recognition, measurement, presentation and disclosure of the various elements of financial statements andrelated disclosures. Assertions used by us to consider the different types of potential misstatements that mayoccur are set out below and have also been linked to the old potential errors.

Assertions Examples of Potential MisstatementsPotentialErrors

Assertions about classes of transactions and events for the period under audit 1:

Occurrence—transactionsand events that have been

recorded have occurred andpertain to the entity

Potential misstatements for classes of transactions and eventsfor 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 inputl  Invalid input is captured in the subsidiary ledgers.

Validity

Completeness—alltransactions and events that

should have been recordedhave been recorded

Potential misstatements for classes of transactions and eventsfor the period under audit, linked to the assertion

completeness, may result from:l  Transactions or events that are not identified and therefore

are not entered on a source document or directly into theapplication system (input)

l  Input is not captured into the subsidiary ledgersl  Input that is rejected is not resubmitted for capture in the

subsidiary ledger.

Completeness

Accuracy—amounts andother data relating torecorded transactions andevents have been recordedappropriately

Potential misstatements for classes of transactions and eventsfor the period under audit, linked to the assertion accuracy,may result from:l  Input is inaccurately captured into the subsidiary ledgersl  Input or subsequent processing reflects amounts in excess

or less than appropriate amountsl  Processing of transactions is inaccurate (i.e., summarizing,

calculating, and posting)l  Inaccurate adjustments are made to the subsidiary ledgers

or general ledger.

Recording

Cutoff —transactions andevents have been recordedin the correct accountingperiod

Potential misstatements for classes of transactions and eventsfor the period under audit, linked to the assertion cutoff, mayresult from:l  Transactions or events that have occurred or will occur are

recorded too early (i.e., they are recorded in a period priorto 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 inwhich they should have been recorded).

Cutoff

Classification—transactions

and events have beenrecorded in the properaccounts

Potential misstatements for classes of transactions and events

for the period under audit, linked to the assertionclassification, may result from:l  Input is recorded in the incorrect subsidiary ledger or

general ledger accountl  Subsequent processing of a transaction results in it being

reflected in the incorrect subsidiary ledger or generalledger account.

Recording

Assertions about account balances at the period end:

Existence—assets,liabilities, and equityinterests exist

Potential misstatements for account balances at the periodend, linked to the assertion existence, may result from:l  An account balance that was previously correctly recorded

no longer exists and the sale/adjustment has not beenrecorded

l  Sale of an asset with no recording of the salel  Theft of an asset with no recording of the loss.

Validity

Rights and obligations—the entity holds or controlsthe rights to assets, andliabilities are the obligations

Potential misstatements for account balances at the periodend, linked to the assertion rights and obligations, may resultfrom:l  The entity no longer having the right to an assets that was

Validity

8/18/2019 Assertions - Practice Aid - March 2010

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 Assertions used in the New DTT Audit Approach Manual –

 Practice Aid – March 2010 – For internal use only 

© Deloitte Touche Tohmatsu 2010 Page 2 of 2

Assertions Examples of Potential Misstatements

Potential

Errors

of the entity previously correctly recordedl  The entity no longer having an obligation to settle a

liability that was previously correctly recorded.

Completeness—all assets,

liabilities and equity intereststhat should have beenrecorded have been recorded

Potential misstatements for account balances at the period

end, linked to the assertion completeness, may result from:l  A liability that should have been recorded has not beenrecorded, e.g., no accrual at period end for certainliabilities.

Completeness

Valuation and allocation—assets, liabilities, and equityinterests are included in thefinancial statements atappropriate amounts andany resulting valuation or

allocation adjustments areappropriately recorded

Potential misstatements for account balances at the periodend, linked to the assertion valuation and allocation, mayresult from:l  Impairments of assets that are not identified and properly

recordedl  Inaccurate adjustments that are made to a account

balance at the period end that inappropriately adjust thevalue of that account balance

l  Assets which are amortized over the incorrect period

resulting in the remaining asset balance being incorrectly

valuedl  Fair value adjustments that are not identified and properly

recorded.

Valuation /Recording

Assertions about presentation and disclosure:

Occurrence and rightsand obligations—disclosed

events, transactions, andother matters have occurredand pertain to the entity

Potential misstatements for disclosures, linked to thepresentation and disclosure assertions may result from:l  Fictitious or unauthorized disclosures are included in the

financial statementsl  Disclosures of contingent liabilities for which the entity no

longer has an obligation forl  Disclosures that are not identified and therefore are not

included in the financial statementsl  Disclosures that are intentionally omitted from the financial

statementsl  The captions in the financial statements result in amountsbeing presented in a misleading way

l  Input is inaccurately captured into the financial statementsl  Input into the financial statements reflects amounts in

excess or less than appropriate amounts.

Presentation

Completeness—alldisclosures that should havebeen included in the financialstatements have been

includedClassification andunderstandability—financial information is

appropriately presented anddescribed, and disclosuresare clearly expressed

Accuracy and valuation—financial and otherinformation are disclosedfairly and at appropriateamounts. 

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

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