Internal Financial Controls Over Financial Reporting: Appendix - 1

Internal Financial Controls over Financial Reporting
Appendix -1:
Illustrative List of RoMMs (i.e. Risk of Material Misstatement-“what could do wrong”) and Control
activities to address the risk:
Cash/Bank balances
Risks of Material Control Activities actually

Transaction Misstatement (“What Other Affected performed by IOTAEC
Type Could Go Wrong”) Assertion(s) Example Control(s) Account(s)
Core Risks and Controls

Recording of Cash receipts:  Existence; On a daily basis, cash Trade receivables
Cash  Have been recorded Rights and receipts recorded to the [Completeness;
(when there are non- Obligations general ledger are agreed to Existence; Rights and
existent cash receipts),  Completeness bank deposit slips by Obligations;
or have been  Valuation and accounting personnel. Valuation and
improperly recorded Allocation Discrepancies are Allocation]
 Have not been investigated and resolved.
recorded/applied (Preventative)
 Are not accurately
recorded. AND/OR
Bank statements are Trade receivables

reconciled to the general [Existence; Rights and
ledger regularly and Obligations;
differences are investigated Completeness;
and resolved on a timely Valuation and
basis. (Detective) Allocation]
Recording of Cash exists in bank Completeness Accounts personnel record

Cash accounts that have not been bank account transactions to
recorded in the general the general ledger on a daily
1
Cash/Bank balances

ledger. basis; Accounts Manager

(Management) reviews
recorded transactions and
cash position regularly for
unusual activity and
investigates and resolves
issues on a timely basis.
(Preventative)
AND/OR
Bank statements are

reconciled to the general
ledger regularly and
differences are investigated
and resolved on a timely
basis. (Detective)
Recording of Not all bank accounts have Completeness New bank accounts are only
Cash been recorded in the opened through the direction
general ledger. and approval of Board of
Directors. When new bank
accounts are approved and
opened, finance personnel
create the general ledger
account and prepare the
journal entry to record the
initial balance in the account.
Management reviews and
approves the new general
ledger account and journal
entry, including supporting
documentation, before the
2
Cash/Bank balances

journal entry is recorded.

(Preventative)
AND/OR
Finance Manager with

knowledge 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)
Recording of Cash stated in the general Existence; Bank statements are

Cash ledger does not reconcile to Rights and reconciled to the general
the cash records/bank Obligations; ledger regularly and
statement, and/or the Completeness; differences are investigated
reconciliation contains Valuation and and resolved on a timely
invalid items. Allocation basis. (Detective)
AND/OR
Finance personnel analyse

amounts recorded to cash
suspense accounts and
prepare journal entries to
correct any unusual items.
approves the journal entries
and supporting analysis
before the journal entry is
3
Cash/Bank balances

recorded. (Preventative)
Cash Acquisitions of fixed assets Existence A 3-way match process is Fixed assets
Disbursements are not recorded. performed for fixed assets [Completeness]
purchases that utilise the
purchase order, receiving Trade payables
document, and vendor [Completeness]
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)
AND/OR
Bank statements are Fixed assets
reconciled to the general [Completeness]
differences are investigated Trade payables
and resolved on a timely [Completeness]
basis. (Detective)
AND/OR
Periodic counts of fixed Fixed assets
assets are performed. [Completeness]
Selections are made from the
floor and reconciled to the Trade payables
fixed assets register, and any [Completeness]
and resolved. (Detective)
Cash Cash/Bank payments are:  Existence; Cash/bank payments are Trade payables
Rights and generated through the ERP [Existence; Rights and
4
Cash/Bank balances

Disbursements  Not recorded Obligations system. The ERP system Obligations;

 Recorded in the general  Completeness automatically records the Completeness;
ledger when no cash  Valuation and journal entry for cash/bank Valuation and
disbursement has been Allocation payments to the trade Allocation]
made payables and cash/bank sub-
 Recorded at the ledgers.(Preventative)
incorrect amount.
Provision for expenses
[Existence; Rights and
Obligations;
Completeness;
Valuation and
Allocation]
AND/OR
All manually generated Trade payables

cheques, including [Existence; Rights and
supporting documentation Obligations;
and the related journal entry, Completeness;
are reviewed and approved Valuation and
by finance manager before Allocation]
the journal entry is recorded.
(Preventative)
Obligations;
Completeness;
Valuation and
Allocation]
AND/OR
5
Cash/Bank balances

Bank statements are Trade payables

reconciled to the general [Existence; Rights and
ledger regularly and Obligations;
differences are investigated Completeness;
and resolved on a timely Valuation and

Obligations;
Completeness;
Valuation and
Allocation]
Cash Loan re- payments have  Existence; Finance Manager with Long-term/short-term
Disbursements been: Rights and knowledge of loan borrowings
Obligations obligation, payment
 Made but are not  Completeness schedules, and other terms [Existence; Rights and
recorded  Valuation and and conditions, periodically Obligations;
 Recorded but have not Allocation reviews the transactions Completeness;
been paid Valuation and
within the loan register.
 Recorded at an amount Allocation]
Discrepancies are
that differs from the
actual amount paid. investigated and resolved on
a timely basis. (Detective)
AND/OR
Bank statements are Long-Term Debt

ledger regularly and [Existence; Rights and
differences are investigated Obligations;
and resolved on a timely Completeness;
6
Cash/Bank balances

basis. (Detective) Valuation and

Allocation]
Other Possible Risks and Controls

Recording of Cash/bank balance Valuation and Cash/bank balance foreign
Cash denominated in foreign Allocation currency translations are
currencies is translated at prepared by finance
the incorrect foreign personnel and reviewed and
exchange rate. approved by finance
manager, who also reviews
supporting documentation
for the translation rate
calculation. (Preventative)
AND/OR
ERP system calculates the

cash/bank balance foreign
currency translation rate,
which is independently
verified by finance manager.
(Preventative)
Recording of Non-existent cash on hand Existence Daily bank deposits are

Cash has been recorded. made for additional cash on
hand (i.e., cash on hand that
exceeds the pre-determined
limit). (Preventative)
AND/OR
On a periodic basis (and

without forewarning) an
employee independent of the
7
Cash/Bank balances

employee(s) who handle

cash performs a count of
cash on hand. (Detective)
Recording of Cash on hand is not Valuation and On a periodic basis (and

Cash accurately recorded. Allocation without forewarning) an
employee independent of the
employee(s) who handle
cash performs a count of
cash on hand. (Detective)
Cash Electronic fund transfers Existence Finance personnel record
Disbursements and bank charges incurred bank account transactions to
are not recorded in the the general ledger on a daily
general ledger. basis; finance manager
reviews recorded entries and
cash position regularly for
unusual activity and
investigates and resolves
issues on a timely basis.
(Preventative)
AND/OR
Bank statements are

and resolved on a timely
basis. (Detective)
Cash Loan re- payments are auto- Existence; Bank statements are Long-term/short-term
Disbursements deducted from the entity’s Rights and reconciled to the general borrowings
bank account (or otherwise Obligations ledger regularly and
made) and not recorded in differences are investigated
8
Cash/Bank balances

the general ledger. and resolved on a timely [Valuation and

AND/OR
On a periodic basis, finance Long-term/short-term

personnel perform a borrowings
reconciliation of the loan
register to the general ledger. [Valuation and
Finance Manager reviews Allocation]
and approves the
reconciliation and any
reconciling items are
reviewed and addressed on a
timely basis. (Detective)
Prepaid Expenses
Risks of Material Control Activities

Misstatement (“What Other Affected actually performed
Transaction Type Could Go Wrong”) Assertion(s) Example Control(s) Account(s) by IOTAEC

Recording Prepaid Prepaid expenses are Existence Finance personnel prepare journal entries
recorded for which no to record prepaid expenses, including
9
Prepaid Expenses

Expenses payment has been made. supporting documentation. Management

reviews the journal entry and supporting
documentation to record prepayments
prior to accounting personnel recording
to the general ledger. (Preventative)
AND/OR
Management with knowledge of prepaid
expense activity reviews recorded
prepaid expenses for proper recording,
including verifying cash payment.
Unusual items are investigated and
corrected on a timely basis. (Detective)
Recording Prepaid Expenditures where no future Existence Finance personnel prepare journal entries Other expenses
Expenses benefit exists to the entity are to record prepaid expenses, including
recorded as prepayments and supporting documentation. Management [Completeness]
deferred on the balance sheet. reviews the journal entries and
supporting documentation to record
prepayments prior to accounting
personnel recording to the general ledger.
(Preventative)
AND/OR
Prepaid expenses and related other Other expenses
expense accounts are analysed on a
monthly basis and compared to budget. [Completeness]
Explanations are obtained for any
significant variances and differences.
The analysis is reviewed by senior
management. (Detective)
Recording Prepaid Prepaid expenses are Valuation and Finance personnel prepare journal entries Other expenses
Expenses recorded at the incorrect Allocation to record prepaid expenses, including
amount. supporting documentation. Management [Completeness]
reviews the journal entries and
10
Prepaid Expenses


(Preventative)
AND/OR
Recording Prepaid Expenditures where future Completeness Invoices for goods or services received Other expenses
Expenses benefits exist for the entity are authorised and accompanied by
are incorrectly recorded as appropriate supporting documentation. [Occurrence]
expenses instead of deferred. Management reviews supporting
documentation and journal entries to
record prepayments prior to accounting
(Preventative)
AND/OR
monthly basis and compared to budget. [Occurrence]
AND/OR
Finance personnel review the nature and Other expenses
11
Prepaid Expenses

type of expenses incurred, and code the [Occurrence]

expense to the appropriate account.
Management reviews the coding,
supporting documentation, and journal
entry before the journal entry is recorded.
(Preventative)
Recording Prepaid Prepaid expenses are not Existence; Prepaid expenses and related other
Expenses removed from the general Rights and expense accounts are analysed on a
ledger when a prepaid asset Obligations monthly basis and compared to budget.
no longer exists. Explanations are obtained for any
Recording Prepaid Prepaid expenses are Completeness Prepaid expenses and related other Other expenses
Expenses incorrectly removed from the expense accounts are analysed on a
general ledger when a monthly basis and compared to budget. [Occurrence]
prepaid asset still exists. Explanations are obtained for any
AND/OR
Management with knowledge of service Other expenses
providers’ transaction terms reviews
prepaid expense general ledger activity [Occurrence]
for unusual adjusting entries.
Discrepancies are investigated and
resolved on a timely basis. (Detective)
Recording Prepaid Prepaid expenses stated in the Existence; On a periodic basis, finance personnel
Expenses general ledger do not Rights and reconcile prepaid expenses to the general
reconcile to the prepaid Obligations; ledger; management reviews the
expense records, and/or the Completeness; reconciliation, including supporting
reconciliation contains Valuation and documentation. Unusual reconciling
invalid items. items are investigated and resolved on a
12
Prepaid Expenses

Allocation timely basis. (Detective)
Amortising Amortisation is recorded in Completeness Finance personnel prepare amortisation Other expenses
Prepaid Expenses advance of the time period schedules for all recorded prepaid [Completeness]
associated with the prepaid expenses, including preparing supporting
expense. documentation for the amortisation
period and methodology. Management
reviews and approves amortisation
schedules for completeness and accuracy
and supporting documentation before
recording amortisation journal entries.
(Preventative)
AND/OR
Management with knowledge of service Other expenses
providers’ transaction terms reviews [Completeness]
recorded prepaid expenses for proper
recording, classification, and
amortisation, including review of
supporting documentation and analyses.
Amortising Amortisation recorded does Existence; Finance personnel prepare amortisation Other expenses
Prepaid Expenses not include all prepaid items. Rights and schedules for all recorded prepaid [Occurrence]
Obligations expenses, including preparing supporting
documentation for the amortisation
(Preventative)
AND/OR
13
Prepaid Expenses

Finance personnel prepare journal entries

to record prepaid expenses, including
supporting documentation. Management
reviews the journal entries and
(Preventative)
Amortising Amortisation recorded Completeness; Finance personnel prepare amortisation Other expenses
Prepaid Expenses includes prepaid items that do Rights and schedules for all recorded prepaid [Completeness]
not exist. Obligations expenses, including preparing supporting
(Preventative)
AND/OR
Finance personnel review the nature and
type of expenses incurred and code the
expense to the appropriate account.
Management reviews the coding,
supporting documentation, and journal
entry before the journal entry is recorded.
(Preventative)
14
Prepaid Expenses

Amortising Useful life assigned or Valuation and Finance personnel prepare amortisation Other expenses
Prepaid Expenses amortisation methodology Allocation schedules for all recorded prepaid [Accuracy]
applied is inappropriate. expenses, including preparing supporting
(Preventative)

Amortising Amortisation of prepaid Valuation and Management with knowledge of prepaid
Prepaid Expenses expenses is recorded in Allocation expense activity reviews the activity
excess of the prepaid amount. within the prepaid expense accounts.
Discrepancies or unusual activity are
investigated and resolved on a timely
basis. (Detective)
AND/OR
Prepaid expenses and related other
monthly basis and compared to budget.
Recording Prepaid Insurance recoveries Valuation and On a periodic basis, management
Expenses receivable may be incorrect Allocation assesses the current insurance claims
due to inappropriate recovery receivable based on the terms of the
assumptions [specify insurance contract and the current
assumptions] used by financial position of insurance companies
management. in determining the insurance companies’
15
Prepaid Expenses

creditworthiness and ability to pay on

insurance claims. (Preventative)
16
Trade receivables
Control Activities
Risks of Material actually
Transaction Misstatement (“What Other Affected performed by
Type Could Go Wrong”) Assertion(s) Example Control(s) Account(s) IOTAEC

Recording of Sales and trade receivables  Existence Invoices are generated only upon Sales
Sales are recorded:  Valuation and matching the purchase order and shipping [Occurrence;
 That do not relate to Allocation documents, completing a 3-way match. Accuracy; Cutoff]
valid sales/shipments  Existence; The 3-way match process is performed
 At the incorrect Completeness within an ERP system that identifies the
amount purchase order and shipping document and
 In the incorrect period. generates an invoice within established
limits. (Preventative)
AND/OR
Proof of delivery is provided by third- Sales
party shippers for all shipments made. The [Occurrence;
proof of delivery is required in order for Accuracy; Cutoff]
the invoice to be generated.
(Preventative)
Recording of Side agreements or credit Existence Representations are received on a Sales
Sales memos exist that are not quarterly basis from sales personnel and [Occurrence]
known to accounting. management regarding the existence of
customer side agreements or credit memos
not yet communicated to accounting.
(Detective)
AND/OR
Credit notes issued after period-end are Sales
verified by finance manager for [Occurrence]
association with side agreements and
proper accounting. (Detective)
Recording of Sales are recorded prior to Existence Sales agreements are reviewed by Sales
Sales all necessary revenue personnel with requisite experience to [Occurrence]
recognition criteria being determine if the revenue recognition
met. criteria are met. (Preventative)
17
Trade receivables
Control Activities
Recording of Goods are shipped to Completeness Shipments of goods to customers are Sales
Sales customers and no invoice is logged. The log is used to determine that [Completeness]
generated and recorded. all shipments are invoiced and that all
invoices are recorded. (Detective)
AND/OR
Management reviews relevant sales, trade Sales
receivables, costs of sales, and inventory [Completeness]
reports related to sales order entry,
shipping/dispatch, and invoicing;
significant, unusual relationships are
monitored and acted upon. (Detective)
Recording of Trade receivables stated in Existence; Reconciliation is performed between trade
Sales the general ledger does not receivables in the general ledger and trade
reconcile to the trade Rights and receivables subsidiary ledger amounts, and
receivables records and/or Obligations; is then reviewed by finance manager. Any
the reconciliation contains Valuation and reconciling items are reviewed and
invalid items. Allocation; addressed on a timely basis. (Detective)
Completeness
Provision for Inappropriate methodology Valuation and Management reviews the provision for Other expenses
doubtful trade for calculating the Allocation doubtful trade receivables methodology, [Accuracy]
receivables provision for doubtful trade assumptions, and underlying calculation
receivables could result in for appropriateness on a periodic basis.
misstated net receivables (Detective)
and bad debt expense.
Provision for Provision for doubtful trade Valuation and The ERP system ages the trade receivables Other expenses
doubtful trade receivables calculation is Allocation based on the parameters established within [Accuracy]
receivables based on inaccurate the ERP system and this computer-
receivables aging data. generated information is used in the
calculation of the provision for doubtful
18
Trade receivables
Control Activities
trade receivables. (Preventative)
Provision for Receivables included in the  Completeness; The ERP system ages the trade receivables
doubtful trade provision for doubtful trade Rights and based on the parameters established within
receivables receivables calculation: Obligations the ERP system and this computer-
 Do not exist or the  Rights and generated information is used in the
entity no longer has Obligations; calculation of the provision for doubtful
rights to such Existence trade receivables. (Preventative)
receivables
 Do not include all AND/OR
receivables.
Finance Manager reviews the provision
for doubtful trade receivables
methodology, assumptions, and
underlying calculation for appropriateness
on a periodic basis. (Detective)
Sales Returns Credit notes are issued or Existence All sales returns are logged when goods Revenue from
and Credit committed to the customer received. Return details per the log are operations
Memos but not recorded. compared to credit notes issued and [Occurrence]
recorded to determine that credit notes are
issued in accordance with company policy.
(Detective)
AND/OR
Representations from operations and sales Revenue from
personnel are obtained indicating that no operations
verbal or unrecorded credit memos exist [Occurrence]
that have not been reported to finance
manager. (Detective)
Sales Returns Credit notes are not issued Existence; All sales returns are logged when Revenue from
and Credit and recorded for goods Rights and Obligations received. Sales return details per the log operations
Memos returned by customers. are compared to credit notes issued to
determine that credit notes are issued in [Occurrence]
19
Trade receivables
Control Activities
accordance with company policy.

(Detective)
Sales Returns Credit notes are issued to Completeness All sales returns are logged when received Revenue from
and Credit customers without the and the returned goods log automatically operations
Memos receipt of returned goods. generates the credit notes. (Preventative) [Completeness]
AND/OR
All sales returns are logged when Revenue from
received. Credit notes issued are compared operations
to the return log to determine that credits [Completeness]
issued are for valid returns. (Detective)
Sales Returns Credit notes are issued for Valuation and Credit notes are generated by the ERP Revenue from
and Credit the incorrect amount. Allocation system. Credit pricing information is operations
Memos obtained from the original sales invoice. [Accuracy]
(Preventative)
AND/OR
ERP system validates the amount of the Revenue from
issued credit note against the original operations
invoice. Credit notes issued in excess of [Accuracy]
the original invoice are flagged and must
be reviewed and approved by finance
manager. (Preventative)
AND/OR
Policy requires that credit notes are not Revenue from
issued in amounts in excess of the original operations
invoice amount; compliance with this [Accuracy]
policy is monitored by finance manager.
(Preventative)
20
Trade receivables
Control Activities
Sales Returns Sales returns reserves are  Valuation and Sales return methodology, significant Revenue from
and Credit not accurately estimated as Allocation assumptions, and supporting operations
Memos a result of:  Valuation and documentation are reviewed by top [Accuracy]
 An inappropriate Allocation management prior to recording the journal
methodology entry. (Preventative)
 Significant
assumptions [specify
assumptions] being AND/OR
inappropriate, lacking Management performs a retrospective Revenue from
sufficient basis, or review supporting the appropriateness of operations
lacking sufficient the methodology and significant [Accuracy]
support. assumptions. (Detective)
AND/OR
Sales returns are analysed on a monthly Revenue from
basis and compared to budget. operations
Explanations are obtained for any [Accuracy]
significant variances and differences. The
analysis is reviewed by senior
management and taken into consideration
when estimating the sales return reserve.
(Detective)
Sales Returns Sales return transactions Existence; Returned goods received and credit Revenue from
and Credit occurring around period- Completeness memos issued at, before, or after the end operations
Memos end are not recorded in the of an accounting period are scrutinised by [Cutoff;
correct period. accounting personnel and/or reconciled to Completeness]
make certain the sales return is recorded in
the appropriate accounting period.
(Detective)
AND/OR
21
Trade receivables
Control Activities
Manual sales return entries made to the Revenue from

general ledger are reviewed and approved operations
by management for proper inclusion in the [Cutoff]
correct accounting period. (Detective)
Cash/bank Cash/bank receipts:  Completeness On a daily basis, cash/bank receipts Cash

Receipts  Have been recorded  Existence; Rights recorded to the general ledger are agreed
(when there are non- and Obligations to bank deposit slips by accounting [Existence; Rights
existent cash receipts),  Valuation and personnel. Discrepancies are investigated and Obligations;
or have improperly Allocation and resolved. (Preventative) Completeness;
been recorded Valuation and
 Have not been Allocation]
recorded/applied
 Are not accurately AND/OR
recorded.
Bank statements are reconciled to the Cash
general ledger regularly and differences
are investigated and resolved on a timely [Existence; Rights
basis. (Detective) and Obligations;
Completeness;
Valuation and
Allocation]
Recording of Invoices are issued and Existence The ERP system only permits invoices to Sales
Sales recorded for shipments to be issued for shipments to valid customer [Occurrence]
non-customer offsite locations based on information contained
locations. in the customer master file. (Preventative)
22
Trade receivables
Control Activities
AND/OR
The customer master file is reviewed for Revenue from
ongoing relevance. (Detective) operations
[Occurrence]
Recording of Invoices are generated and Existence; Valuation Invoices can only be generated for Revenue from
Sales sales recorded for and Allocation customers that exist in the customer operations
shipments to fictitious master file. Access to add, change, or [Occurrence]
customers. delete information in the customer master
file is limited to approved personnel.
(Preventative)
AND/OR
The customer master file generates an Revenue from
exception report listing new and deleted operations
customers, shipping address changes, etc., [Occurrence]
and the report is reviewed by the credit
manager and controller. (Detective)
AND/OR
Customer master file data is periodically Revenue from
reviewed by management for accuracy and operations
ongoing pertinence. (Detective) [Occurrence]
Recording of Invoices are generated and Existence; Consigned inventory is confirmed and Revenue from
Sales recorded for sales of Valuation and confirmations are reconciled to inventory operations
consigned inventory based Allocation records and the general ledger. Randomly, [Occurrence;
on incorrect data provided consigned inventory is physically verified Accuracy]
to the entity by the by company personnel. (Detective)
consignee. AND/OR
Customers who receive consigned goods Revenue from
are specifically identified as consignment operations
customers in the ERP customer master [Occurrence;
file. The ERP system generates a report of Accuracy]
23
Trade receivables
Control Activities
invoices to consignment customers that is

scrutinised by management for proper
revenue recognition. (Detective)
Recording of Sales and trade receivables Valuation and Management prepares an analysis of the Revenue from
Sales are inappropriately Allocation terms and conditions of significant sale operations
presented (either over- or transactions, including reference to the [Accuracy;
understated) from the appropriate accounting framework and Occurrence;
misapplication of GAAP principles. This analysis is reviewed and Completeness]
when acting as a principal approved by senior management.
or agent in a revenue (Preventative)
transaction. AND/OR
Sales transactions, volumes, and values Revenue from
are analysed on a monthly basis and operations
compared to budget. Explanations are [Accuracy;
obtained for any significant variances and Occurrence;
differences. The analysis is reviewed by Completeness]
senior management. (Detective)
Recording of Foreign sales and trade Valuation and Foreign sales and trade receivables Revenue from
Sales receivables are restated at Allocation restatement is prepared by staff personnel operations
the incorrect foreign and reviewed/approved by finance [Accuracy]
exchange rate. manager. Analysis reviewed/approved by
finance manager includes supporting
documentation for the translation rate
calculation. (Preventative)
AND/OR
ERP system calculates the foreign sales Revenue from
and trade receivables restatement rate, operations
which is independently verified by finance [Accuracy]
manager. (Preventative)
24
Trade receivables
Control Activities
Recording of Inventory held on Completeness Consigned inventory is confirmed and Revenue from
Sales consignment and confirmations are reconciled to inventory operations
subsequently sold has not records and the general ledger. Randomly, [Completeness]
been invoiced and recorded consigned inventory is physically verified
as a sale and receivable. by company personnel. (Detective) Inventory
[Existence]
AND/OR
Inventory consignee (third party) provides Revenue from
periodic reporting of consigned inventory operations
held. These reports are reviewed and [Completeness]
reconciled to internal records and
differences are investigated. (Detective) Inventory
[Existence]
Provision for Sales are made to Valuation and Credit limits are established by the credit Revenue from
Doubtful Trade customers with poor credit, Allocation manager based on the customer’s ability to operations
receivables which may affect revenue pay and past collection results, and are [Occurrence]
recognition criteria being reviewed on a regular basis.
met and the ultimate write- (Preventative)
off of uncollectible trade
receivables.
Provision for Invoices are generated in Valuation and ERP system suspends purchase orders that Revenue from
Doubtful Trade excess, individually or in Allocation individually or aggregately exceed operations
receivables the aggregate, of customer customer credit limits. Approval by the [Occurrence]
credit limits, which may credit manager is required prior to the
affect revenue recognition ERP system recording the purchase order.
criteria being met and the (Preventative)
ultimate write-off of
uncollectible trade
receivables.
25
Trade receivables
Control Activities
Provision for Provision for doubtful trade Valuation and Management reviews the provision for Other expenses
Doubtful Trade receivables is insufficient in Allocation doubtful trade receivables methodology, [Accuracy]
receivables reserving for both unknown assumptions, and underlying calculation
but historically predictable for appropriateness on a periodic basis.
bad debt and specific (Detective)
known bad debt.
Provision for Management does not Valuation and Management reviews the assumptions Other expenses
Doubtful Trade appropriately consider Allocation utilised in calculating the provision to [Accuracy]
receivables economic, industry, or assess and conclude whether the
customer financial assumptions take into consideration the
considerations in the current economic environment, specific
calculation of provision for customer financial conditions, regulatory
doubtful trade receivables. changes, industry issues, etc. Based on
their review, management approves the
provision for doubtful trade receivables.
(Preventative)
Provision for Provision for doubtful trade Valuation and Credit manager reviews aged trade Other expenses
Doubtful Trade receivables is overstated Allocation receivables and documentation of [Accuracy]
receivables due to possible collection activities performed by the
management bias credit personnel supporting the specific
concerning specific reserve and approves the recorded specific
customer reserves. reserves. (Preventative)
Write-off of Trade receivables are Completeness; Rights Management reviews and approves write- Other expenses
Uncollectible incorrectly written off. and Obligations offs of trade receivables. [Occurrence]
trade
receivables and
adjustments to
the Provision
for Doubtful
26
Trade receivables
Control Activities
debts Account
Write-off of Receivables write-offs Valuation and Trade receivables write-offs are performed Other expenses
Uncollectible using the direct write-off Allocation by accounting personnel in accordance [Accuracy]
trade method are not authorised with the write-off policy. Management
receivables and in accordance with the reviews trade receivables write-offs for
adjustments to established policy and, as a compliance with the established policy.
the Provision result, may be invalid. (Detective)
for Doubtful
debts Account
Recoveries of Recoveries of trade Classification Management reviews recoveries of trade Other expenses
Trade receivable receivables previously receivables previously written off. Journal [Classification]
written off are improperly entries made to record trade receivables
recorded in the Statement recoveries are reviewed and approved by
of Profit and Loss. management prior to recording.
Sales Returns Credit notes are issued at an Valuation and Policy requires that credit notes are not Revenue from
and Credit amount in excess of the Allocation; issued in amounts in excess of the original operations
Notes original invoice. Completeness invoice amount; compliance with this [Completeness;
policy is monitored by management via Accuracy]
review of credit notes prior to issuance.
(Preventative)
AND/OR
27
Trade receivables
Control Activities
ERP system validates the amount of the Revenue from

issued credit note against the original operations
invoice and creates an exception report for [Completeness;
credit notes in excess of the original Accuracy]
invoices. Management reviews, then
approves or corrects, items on the
exception report based on documentation
and support provided. (Detective)
Sales Returns For sales transactions that Valuation and For sales transactions that trigger Revenue from
and Credit trigger promotional Allocation promotional allowances or volume operations
Notes allowances or volume discounts, the calculation for promotional [Occurrence]
rebates, the promotional allowances and volume rebates and
allowance or volume rebate supporting documentation are reviewed by
is not appropriately management prior to recording the journal
recorded. entry. (Preventative)
AND/OR
For customers receiving promotional Revenue from
allowances or volume discounts, operations
management periodically analyses goods [Occurrence]
returned that may indicate inappropriate
recording of promotional allowances or
volume discounts. (Detective)
AND/OR
28
Trade receivables
Control Activities
Promotional allowances and volume Revenue from

discounts are analysed on a monthly basis operations
and compared to budget. Explanations are [Occurrence]
obtained for any significant variances and
differences. The analysis is reviewed by
Sales Returns Provision for promotional  Valuation and The methodology for accruing for Revenue from
and Credit allowances or volume Allocation promotional allowances/volume discounts, operations
Memos discounts are not accurately  Valuation and significant assumptions used, and [Accuracy]
estimated as a result of: Allocation supporting documentation are reviewed by
 An inappropriate management prior to recording the journal
methodology entry. (Preventative)
 Significant AND/OR
assumptions] being Management performs a retrospective Revenue from
inappropriate, lacking review supporting the appropriateness of operations
sufficient basis, or the methodology and significant [Accuracy]
lacking sufficient assumptions. (Detective)
support AND/OR
Promotional allowances and volume Revenue from
discounts are analysed on a monthly basis operations
and compared to budget. Explanations are [Accuracy]
senior management and taken into
consideration when estimating the reserve
for promotional allowances and rebates.
(Detective)
Other Receivables recorded for  Rights and Management periodically evaluates

Receivables insurance recoveries are Obligations insurance receivable by obtaining the
29
Trade receivables
Control Activities
recorded:  Valuation and insurance contracts and determining

 When the entity does Allocation whether the insurance receivable recorded
not have the right to is appropriate based on the terms of the
the insurance proceeds insurance contract. Management evaluates
or the creditworthiness of the insurance
 At an inappropriate company in determining the value of the
amount as the insurance receivable recorded.
insurance company’s (Preventative)
creditworthiness was
not appropriately
considered.
Inventory


Recording Inventory and trade payables Existence; Rights and Inventory and trade payables entries Trade payables
Inventory are recorded prior to receipt Obligations are recorded automatically by the
and/or title transfer of the ERP system upon matching the [Existence;
inventory. purchase order and goods received
Rights and
note (GRN). (Preventative)
Obligations; ]
AND/OR
30
Inventory

Management reviews and approves Trade payables

the journal entry and supporting
documentation for inventory and [Existence;
trade payables recorded for goods not
Rights and
yet received, but title has transferred
to the entity. (Preventative) Obligations;]
AND/OR
Physical inventory is counted Trade payables
periodically and discrepancies are
investigated and corrected within the [Existence;
inventory records. Inventory records
Rights and
based on the physical inventory are
reconciled to the general ledger with Obligations]
any differences being recorded as a
book-to-physical inventory
adjustment. (Detective)
AND/OR
On a periodic basis, finance personnel Trade payables
review open purchase orders and
record inventory and accrued [Existence;
payables for goods received or for
Rights and
goods not yet received where title has
transferred to the entity. The journal Obligations;]
entry and supporting documentation
is reviewed and approved by
management before the journal entry
is recorded. (Preventative)
Recording Inventory and trade payables Valuation and Inventory and trade payables entries Trade payables
Inventory are recorded at the incorrect Allocation are recorded automatically by the
amount. ERP system upon matching the [Valuation and
purchase order and GRN. Allocation]
(Preventative)
31
Inventory

Recording Inventory and trade payables Completeness Management reviews and approves Trade payables
Inventory are not recorded upon the journal entry and supporting
transfer of ownership prior documentation for inventory and [Completeness]
to actual receipt. trade payables recorded for goods not
yet received, but title has transferred
to the entity. (Preventative)
Recording Inventory is received and Completeness Inventory and trade payables entries Trade payables
Inventory not recorded in the inventory are automatically recorded by the
system. ERP system upon matching the [Completeness]
purchase order and GRN.
(Preventative)
AND/OR
Physical inventory is counted Trade payables
investigated and corrected within the [Completeness]
reconciled to the general ledger with
AND/OR
On a periodic basis, finance personnel Trade payables
review open purchase orders and
record inventory and accrued [Completeness]
payables for goods received or for
goods not yet received where title has
transferred to the entity. The journal
are reviewed and approved by
management before the journal entry
32
Inventory

Recording Inventory stated in the Completeness; Management reviews and approves Cost of Sales
Inventory general ledger does not Existence; the reconciliation of the inventory
reconcile to the inventory records to the general ledger and any [Occurrence;
records and/or the Rights and reconciling items are reviewed and Completeness;
reconciliation contains Obligations; addressed on a timely basis. Accuracy;
invalid items. (Detective)
Valuation and Cutoff;
Allocation Classification]
Recording removal Inventory may be removed Completeness Cost of sales is recorded and Cost of Sales
of Inventory from inventory records and inventory is relieved automatically by
recorded as a cost of sales the ERP system upon matching the [Occurrence]
when it has not actually been customer sales order, shipping
sold. documents, and the invoice
generated, completing a 3-way match.
(Preventative)
AND/OR
Physical inventory is counted Cost of Sales
investigated and corrected within the [Occurrence]
Recording removal Inventory records include Existence; Cost of sales is recorded and Cost of Sales
of Inventory inventory that was sold to Rights and inventory is relieved automatically by
customers and not recorded Obligations the ERP system upon matching the [Completeness]
as cost of sales. customer sales order, shipping
documents, and the invoice
(Preventative)
33
Inventory

AND/OR
Recording removal Inventory may be removed Completeness Management reviews and approves Cost of Sales
of Inventory from inventory records and the journal entry and supporting
recorded as a cost of sales documentation for inventory and cost [Occurrence]
upon shipment prior to of goods sold for goods that have
transfer of ownership. been dispatched prior to transfer of
ownership. (Preventative)
Recording removal Inventory that was sold to Existence; Cost of sales is recorded and Cost of Sales
of Inventory customers and recorded as Rights and inventory is relieved automatically by
cost of sales are recorded in Obligations; the ERP system upon matching the [Cutoff]
the incorrect period. Completeness customer sales order, shipping
(Preventative)
AND/OR
investigated and corrected within the [Cutoff]
34
Inventory

Recording removal Inventory has been sold that Valuation and On a periodic basis, accounting Cost of Sales
of Inventory is removed from the Allocation personnel calculate the inventory cost
accounts at incorrect under the costing method utilised by [Accuracy]
amounts. 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 Cost of Sales

inventory is relieved automatically by
the ERP system upon matching the [Accuracy]
customer sales order, shipping
(Preventative)
Physical Inventory Physical inventory counts Existence; Physical inventory is counted Cost of Sales
are not performed on a Rights and periodically and discrepancies are [Occurrence;
periodic basis, potentially Obligations; investigated and corrected within the Completeness;
resulting in inaccurate Completeness; inventory records. Inventory records Accuracy]
inventory records. Valuation and based on the physical inventory are
Allocation reconciled to the general ledger with
book to physical inventory
Physical Inventory Physical inventory counts:  Existence Physical inventory is counted Cost of Sales
 Count inventory that  Completeness periodically, and discrepancies are [Occurrence;
does not exist  Existence; investigated and corrected within the Completeness;
 Do not include counts Completeness inventory records. Inventory records Cutoff;
of all inventory  Valuation and based on the physical inventory are
35
Inventory

 Do not include Allocation reconciled to the general ledger, with Accuracy ]

consideration of  Valuation and any differences being recorded as a
movement of inventory Allocation book-to-physical inventory
during the physical adjustment. (Detective)
inventory
 Are not valued at the
appropriate cost
 Book to physical
adjustments are not
recorded or recorded at
the incorrect amount.
Inventory Held by Inventory held by a third Existence; Rights and On a periodic basis, the reports Cost of Sales
Third Parties party that has been sold to a Obligations provided by the third party to the [Completeness]
final customer has not been entity, either directly or by
removed from inventory or confirmation, are reviewed and
recorded as a cost of sales. reconciled to internal records and
used by the entity to relieve inventory
and record cost of sales.
Inventory Held by Inventory held by a third Completeness On a periodic basis, the reports Cost of Sales
Third Parties party and not yet sold is provided by the third party to the [Occurrence]
improperly removed from entity, either directly or by
inventory and recorded as confirmation, are reviewed and
cost of sales. reconciled to internal records and
used by the entity to relieve inventory
and record cost of sales.
Inventory Inventory records include Valuation and Physical inventory is counted Cost of Sales
inventory that is not in a Allocation periodically, and discrepancies are [Completeness]
Valuation salable condition. investigated and corrected within the
reconciled to the general ledger, with
36
Inventory

Inventory Inventory may be recorded Valuation and On a periodic basis, accounting Cost of Sales
at the incorrect cost under Allocation personnel calculate the inventory cost
Valuation the entity’s costing method. under the costing method utilised by [Accuracy]
the entity. Prior to recording the
account classification. (Preventative)
AND/OR
On a quarterly basis, accounting Cost of Sales

personnel compare the costs
automatically calculated by the ERP [Accuracy]
system to manually calculated
inventory costs using the selected
costing method for a sample of
inventory items. (Detective)
AND/OR
Management meets monthly in Cost of Sales

product cost review meeting to
discuss results of operations, [Accuracy]
specifically focused on production
cost evaluation including a
comparison of current-period
productions cost to the current-year
budget and prior-period benchmarks.
(Detective)
AND/OR
Changes made to inventory costing Cost of Sales

methods are approved by
37
Inventory

management before becoming [Accuracy]

effective. (Preventative)
Inventory The entity uses inappropriate Valuation and Management reviews the new Cost of Sales
Valuation standard costs in valuing its Allocation standard cost analysis and supporting
inventory, including documentation and approves changes [Accuracy]
incorrectly calculating the to standard costs, including labour
allocation of labour and and overhead allocation assumptions,
overhead. before the changes are made to the
inventory ERP system.
(Preventative)
AND/OR
Management compares the revised Cost of Sales

standard cost master file to the
approved standard cost per the New [Accuracy]
Standard Cost Report. (Preventative)
Inventory Inventory costs are Valuation and Periodically, management reviews Cost of Sales
Valuation inaccurate due to the Allocation and evaluates the process to account
inaccurate calculation of for and calculate product cost [Accuracy;
product cost variances. variances. (Preventative) Classification]
AND/OR
The report logic used to generate the Cost of Sales

Cost Variance Report is non-
configurable by system users. [Accuracy;
(Preventative) Classification]
AND/OR
Any changes to the Cost Variance Cost of Sales

Report parameters or configuration
can only be made by the System [Accuracy;
38
Inventory

Administrator — Inventory and Classification]

require approval by the Corporate
Controller, evidenced by signoff on
the Change Request Form before
becoming effective. (Preventative)
Inventory Product cost variances have Valuation and Prior to recording the monthly journal Cost of Sales
Valuation been inaccurately allocated Allocation entry to allocate product cost
between period costs and variances to period-end inventory, [Accuracy;
period-end inventory. management reviews the product cost Classification]
variance calculation, which includes
an assessment of the methodology,
supporting documentation, and
mathematical accuracy.
(Preventative)
Inventory Inventory may be recorded Valuation and Management reviews and approves Cost of Sales
Valuation at an amount that exceeds Allocation the cost v/s NSR evaluation prepared
the lower of cost or net by finance personnel and the resulting [Accuracy]
realisable value (NRV) as journal entry. (Preventative)
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.
Inventory The adjustment for lower of Valuation and Management reviews and approves Cost of Sales
Valuation cost or NRV is recorded in Allocation the cost v/s NSR evaluation prepared
the incorrect accounting by finance personnel and the resulting [Cutoff]
period. journal entry. (Preventative)
39
Inventory

Inventory The adjustment for lower of Existence; Rights and Management reviews and approves Cost of Sales
Valuation cost or NRV stated in the Obligations; the cost v/s NSR evaluation prepared
general ledger does not Completeness; by finance personnel and the resulting [Occurrence;
reconcile to the calculation Valuation and journal entry. (Preventative) Accuracy;
and/or contains Allocation Completeness]
mathematical errors.
Inventory In evaluating the  Valuation and Management reviews and approves Cost of Sales
Valuation adjustments for obsolete, Allocation the excess and obsolete adjustment
slow moving, or excess  Valuation and calculation prepared by finance [Accuracy]
inventory: Allocation personnel and resulting journal entry.
 Management’s method (Preventative)
for determining the E&O
(excess and obsolete)
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 used in
estimating E&O
adjustments include:
[specify assumptions].
Inventory Obsolete, slow moving, or Completeness; Management reviews and approves Cost of Sales
Valuation excess inventory exists but Valuation and the excess and obsolete adjustment
no adjustment is recorded Allocation calculation prepared by finance [Completeness]
against inventory and as a personnel and resulting journal entry.
component of cost of sales. (Preventative)
AND/OR
40
Inventory


book to physical inventory
Inventory Obsolete, slow moving, or Existence; Valuation Management reviews and approves Cost of Sales
Valuation excess inventory does not and Allocation the excess and obsolete adjustment
exist but an adjustment is calculation prepared by finance [Occurrence]
recorded against inventory personnel and resulting journal entry.
and as a component of cost (Preventative)
of sales. AND/OR
Management periodically reviews Cost of Sales
actual inventory, cost of sales, gross
profit, and other expense amounts in [Occurrence]
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)
Inventory The calculations for Valuation and The inventory management system Cost of Sales
Valuation obsolete, slow-moving, or Allocation generates the Inventory
excess inventory and related Usage/Movement Report based on [Accuracy]
adjustments are based on parameters in the inventory
inaccurate inventory management system. (Preventative)
usage/movement data.
41
Inventory

Inventory The adjustment for obsolete, Valuation and Management reviews and approves Cost of Sales
Valuation slow moving, or excess Allocation; the excess and obsolete adjustment
inventory is recorded at the Completeness; calculation prepared by finance [Accuracy; Cutoff;
incorrect amount, in the Existence personnel and resulting journal entry. Classification]
incorrect general ledger (Preventative)
account, or in the incorrect
accounting period
Inventory The adjustment for obsolete, Valuation and Management reviews and approves Cost of Sales
Valuation slow-moving, or excess Allocation; the excess and obsolete adjustment
inventory stated in the Completeness; calculation prepared by finance [Occurrence;
general ledger does not Existence personnel and resulting journal entry. Accuracy;
reconcile to the calculation (Preventative) Completeness;
and/or contains Cutoff;
mathematical errors. Classification]
Inventory Returns Inventory returned to  Existence; The ERP system automatically Trade payables
suppliers is: Rights and records entries to reduce inventory
 Not removed from the Obligations and trade payables as per the sub- [Existence;
inventory and trade  Valuation and ledgers upon matching the goods
Rights and
payables records Allocation return order, shipping document, and
debit note, completing a 3-way Obligations;
 Recorded at the
incorrect amount match. (Preventative) Valuation and
Allocation]
AND/OR
Inventory returned to suppliers is Trade payables
separately logged. On a periodic
basis, the return log is utilised to [Existence;
verify inventory is relieved and trade
Rights and
payables is reduced for inventory
returned to suppliers. (Detective) Obligations;
Valuation and
Allocation]
42
Inventory

Inventory Returns Inventory recorded as Completeness Inventory returned to suppliers is Trade payables
returned to vendors separately logged. On a periodic
(removed from the inventory basis, the return log is utilised to [Completeness]
and trade payables records) verify inventory is relieved and trade
is not actually returned. payables is reduced for inventory
returned to suppliers. (Detective)
Sales Returns Inventory returns from  Existence; Manual journal entries to record Cost of Sales
customers are recorded: Rights and inventory purchases or returns and
 Prior to receipt Obligations related accrued payable adjustments [Occurrence;
 At the incorrect amount  Valuation and are prepared by finance personnel and Accuracy; Cutoff]
 In the incorrect period. Allocation supported by documentation that the
 Existence; inventory has been received or title
Completeness has transferred to the entity prior to
recording the entry. Management
reviews and approves the journal
entry and underlying supporting
documentation. (Preventative)
AND/OR
investigated and corrected within the [Occurrence;
inventory records. Inventory records Accuracy; Cutoff]
Sales Returns Goods returned by  Completeness Warehouse personnel enter all goods Cost of Sales
customers are:  Valuation and received into the ERP system on the
 Not recorded Allocation date of receipt, and the ERP system [Completeness;
 Recorded at the  Existence; automatically records an adjustment Accuracy; Cutoff]
incorrect amount Completeness to the inventory subsidiary ledger and
to cost of sales in the general ledger.
43
Inventory

 Recorded in the (Preventative)

incorrect period. AND/OR
All returned goods are logged when Cost of Sales
received. On a periodic basis, return
details as per the log are compared to [Completeness;
the inventory records to verify the Accuracy; Cutoff]
returned inventory is properly
recorded in the inventory sub-ledger,
and to verify cost of sales has been
reduced in the general ledger.
(Detective)
Recording Inventory issued on Completeness Consigned inventory is confirmed Cost of Sales
Inventory consignment and not yet and confirmations are reconciled to [Occurrence]
sold is improperly removed inventory records and the general
from inventory and recorded ledger. On a periodic basis, consigned
as cost of sales. inventory is physically verified by
company personnel and reconciled to
the inventory records. (Detective)
AND/OR
Inventory consignee provides Cost of Sales
periodic reporting of consigned [Occurrence]
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)
Recording Inventory held on Existence Consigned inventory is confirmed Cost of Sales
Inventory consignment and and confirmations are reconciled to [Completeness]
44
Inventory

subsequently sold has not inventory records and the general

been invoiced and recorded ledger. Randomly, consigned
as a sale and receivable. inventory is physically verified by
company personnel. (Detective)
AND/OR
Inventory consignee (third party) Cost of Sales
provides periodic reporting of [Completeness]
consigned inventory held. These
reports are reviewed and reconciled
to internal records and differences are
investigated. (Detective)
Recording Inventory held at offsite Completeness Physical inventory, including Cost of Sales
Inventory locations is improperly inventory held at offsite locations, is [Occurrence]
removed from inventory and counted periodically and
recorded as cost of sales. discrepancies are investigated and
corrected within the inventory
records. Inventory records are
reconciled to the general ledger.
(Detective)
Recording Inventory records include Existence Physical inventory is counted Cost of Sales
Inventory inventory that does not exist periodically and discrepancies are
due to shrinkage, which has investigated and corrected within the [Completeness]
not been recorded as a inventory records. Inventory records
component of cost of sales. are reconciled to the general ledger.
(Detective)
Recording Inventory previously issued Existence; Rights & On a periodic basis, consigned Cost of Sales
Inventory on consignment that has Obligations inventory is physically verified by [Completeness]
been sold to a third party has company personnel and reconciled to
not been removed from the inventory records. (Detective)
inventory or recorded as a AND/OR
cost of sale.
On a periodic basis, the inventory Cost of Sales
consignee provides the entity [Completeness]
45
Inventory

reporting of consigned inventory sold

to third 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)
Inventory Intercompany profits are:  Existence Intercompany sales are analysed at Cost of Sales
Valuation  Not eliminated from  Valuation and period-end to calculate the amount of [Occurrence;
inventory Allocation intercompany profit in inventory to Accuracy]
 Eliminated at the be eliminated. Finance personnel
incorrect amount. 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.
46
Inventory

Inventory Volume or purchase Valuation and On a periodic basis, purchasing Cost of Sales
Valuation discounts from suppliers are Allocation provides the accounting function with [Accuracy;
recorded in improper analysis of inventory purchases Classification]
accounts (e.g., cost of sales, related to all supplier volume/rebate
inventory) or at incorrect agreements. Accounting personnel
amounts. calculate the estimated volume
discount. Prior to recording the Trade payables
[Valuation and
Allocation]
classification. (Preventative)
AND/OR
Management subsequently compares Cost of Sales
volume discount cash received to the
recorded volume discount estimate [Accuracy;
for accuracy. Discrepancies are Classification]
investigated and corrected, as
necessary. (Detective)
Trade payables
[Valuation and
Allocation]
AND/OR
investigated and corrected within the [Accuracy;
inventory records. Inventory records Classification]
are reconciled to the general ledger.
47
Inventory

(Detective)
48
Fixed Assets

Transaction Misstatement (“What Other Affected actually performed
Type Could Go Wrong”) Assertion(s) Example Control(s) Account(s) by IOTAEC

Disposal of Fixed The sale, disposal, or theft  Existence; Periodic counts of fixed assets are
Assets of fixed assets, including Rights and performed. Selections made from the
assets held for sale, has not Obligations property, plant, and equipment register
been recorded. are verified for existence, and agreed to
supporting documentation that legal title
and rights to the asset are held.
(Detective)
AND/OR
On a periodic basis, operations
management reviews the fixed assets
register to verify existence and rights to
the assets, and communicates errors
identified to accounting management for
investigation and correction. (Detective)
Acquisition of Additions are recorded:  Existence A 3-way match process is performed for
Fixed Assets  For fixed assets that do  Rights and fixed assets purchases that utilise the
not exist Obligations purchase order, receiving document, and
 When the entity does  Valuation and vendor invoice. Once the 3-way match
not have legal title to Allocation process is performed and the key terms
the fixed assets of the purchase are verified, a
 At the incorrect transaction is posted in the fixed assets
amount. sub-ledger and general ledger to record
the addition. (Preventative)
AND/OR
Periodic counts of fixed assets are

performed. Selections are reconciled to
the fixed assets register, verified for
existence and ownership, and agreed to
supporting documentation that legal title
49
Fixed Assets

is held. (Detective)
AND/OR
On a periodic basis, operational

management reviews the fixed assets
register to verify existence and
ownership, and communicates errors
identified to accounting management for
investigation and correction. (Detective)
Acquisition of Expenditures of a non- Existence Expenditures of a non-capital nature are Other expenses
Fixed assets capital nature (e.g., repairs reviewed and approved by finance [Completeness]
and maintenance) have personnel with knowledge of the
been incorrectly capitalised. entity’s 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)
AND/OR
Recorded capital expenditures and other Other expenses

expenses are compared to budget [Completeness]
regularly; management investigates and
resolves significant variances.
(Detective)
Acquisition of Acquisitions of fixed assets Completeness A 3-way match process is performed for Cash
Fixed assets are not recorded. fixed assets purchases that utilise the [Existence]
purchase order, receiving document, and
vendor invoice. Once the 3-way match Trade payables
process is performed and the key terms [Completeness]
of the purchase are agreed to supporting
documentation, a transaction is posted in
50
Fixed Assets

the fixed assets sub-ledger and general

ledger to record the addition.
(Preventative)
AND/OR
Periodic counts of fixed assets are Cash
performed. Selections are made from the [Existence]
floor and reconciled to the fixed assets
register, and any differences are Trade payables
investigated and resolved. (Detective) [Completeness]
Acquisition of Subsequent improvements Completeness Subsequent improvement project plans Other expenses
Fixed assets made to fixed assets (e.g., are reviewed by finance personnel with [Occurrence]
remodels, additions) are knowledge of the entity’s capitalisation
incorrectly expensed. policy. The journal entry and supporting
documentation for subsequent
improvement expenditures are reviewed
by management prior to the journal
entry being posted. (Preventative)
AND/OR
Recorded other expenses are compared Other expenses
to budget regularly; management [Occurrence]
investigates and resolves significant
variances. (Detective)
Depreciating Depreciation expense is:  Valuation and Management reviews fixed assets Cost of Sales
Fixed assets  Calculated using an Allocation additions for appropriate assignment of [Accuracy;
inappropriate rate or  Valuation and depreciable lives and methodology, and Occurrence]
using an inappropriate Allocation performs a periodic review of
methodology  Existence depreciable lives and depreciation Depreciation and
 Recorded at the methodology for all fixed assets for amortisation expense
incorrect amount ongoing appropriateness. (Detective) [Accuracy;
Occurrence]
51
Fixed Assets

 Not calculated for all

AND/OR
fixed assets.
On a periodic basis, management Cost of Sales
performs a retrospective analysis of [Accuracy;
fixed assets disposals to challenge the Occurrence]
depreciable lives and methodology
being applied to fixed assets. Depreciation and
(Detective) amortisation expense
[Accuracy;
Occurrence]
Depreciating Depreciation expense is Completeness Expenditures of a non-capital nature are Cost of Sales
Fixed assets recorded for assets of a reviewed and approved by finance [Occurrence]
non-capital nature or for personnel with knowledge of the
assets that have been entity’s capitalisation policy. Journal Depreciation and
disposed. entry and supporting documentation for amortisation expense
expenditures of a non-capital nature are [Occurrence]
(Preventative)
AND/OR
Management reviews fixed assets Cost of Sales
additions for appropriate assignment of [Occurrence]
depreciable lives and methodology, and
performs a periodic review of Depreciation and
depreciable lives and depreciation amortisation expense
methodology for all fixed assets for [Occurrence]
ongoing appropriateness. (Detective)
52
Fixed Assets

Fixed assets Fixed assets stated in the Existence; On a periodic basis, a roll-forward of
Valuation general ledger does not Completeness; fixed assets is performed by the ERP
reconcile to the subsidiary Valuation and system or manually using computer-
ledger and/or the Allocation; Rights generated information and reconciled to
reconciliation contains and Obligations the general ledger; differences are
invalid items. investigated and corrected. (Detective)
Fixed assets Impairment indicators may Valuation and On a periodic basis, accounting and Other expenses
Valuation exist for fixed assets, but Allocation operations management meet to assess [Completeness]
are not known to internal or external factors that may be
management. indicators of impairment.
(Preventative)
AND/OR
Management periodically reviews Other expenses

budgeted versus actual results for the [Completeness]
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)
Acquisition of Operating leases for fixed Existence New lease contracts and lease Long-term/short-
Fixed assets assets are incorrectly modifications are reviewed by finance term borrowings
accounted for as finance personnel to determine whether they [Existence]
leases. meet the criteria for finance or operating
lease treatment, including reference to Other expenses
the appropriate accounting framework [Completeness]
and principle. The journal entry and
supporting documentation are reviewed
53
Fixed Assets

AND/OR
New lease contracts and lease Long-term/short-

modifications recorded in the lease term borrowings
registeri are periodically reviewed by [Existence]
management to verify that the lease has
been properly accounted for as a finance Other expenses
or operating lease. (Detective) [Completeness]
Acquisition of Finance leases for fixed Completeness New lease contracts and lease Long-term/short-
Fixed assets assets are incorrectly modification are reviewed by finance term borrowings
accounted for as operating personnel to determine whether they
leases. meet the criteria for finance or operating [Completeness]
lease treatment, including reference to
the appropriate accounting framework
and principle. The journal entry and Other expenses
[Occurrence]
AND/OR
register are periodically reviewed by
management to verify that the lease has [Completeness]
been properly accounted for as a finance
or operating lease. (Detective)
Other expenses
[Occurrence]
Acquisition of Capital Work in progress Valuation and Operations management periodically

Fixed assets (CWIP) is not transferred to Allocation reviews the listing of CWIP and
54
Fixed Assets

fixed assets when the asset communicates to accounting

is placed into service. management any CWIP assets that have
been put into service. (Detective)
Acquisition of Capitalised interest is:  Existence CWIP is reviewed by finance personnel Finance Cost
Fixed assets  Inappropriately  Completeness with knowledge of the entity’s [Occurrence;
recorded for assets  Valuation and capitalisation policy. Finance personnel Completeness;
directly purchased and Allocation consider whether the assets constructed Accuracy]
put into service qualify for capitalised interest based on
 Not recorded for assets nature of the asset, and amount of
constructed interest incurred in the period, and
 Recorded at the calculate the amount of interest to be
incorrect amount. 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)
Fixed assets Cash flow projections or Valuation and Financial forecasts are prepared by
Valuation significant assumptions Allocation finance personnel with an appropriate
used in the impairment test level of knowledge of accounting
are inconsistent with cash requirements. Management (1) reviews
flow projections or the financial forecast methodology for
significant assumptions appropriateness and consistent
used for other purposes application to other financial forecasts
(e.g., going concern, prepared and (2) reviews, challenges,
deferred tax asset, fixed and approves the significant
asset impairment). assumptions applied. (Preventative)
Fixed assets The valuation methodology  Valuation and A valuation analysis is performed by Other expenses
Valuation used for impairment Allocation qualified personnel at the entity or by a [Accuracy]
purposes is:  Valuation and qualified third-party appraiser. The
 Inappropriate under the Allocation valuation methodology, significant
circumstances assumptions, and underlying data used
 Based on underlying are reviewed, evaluated, and approved
55
Fixed Assets

significant assumptions by management with appropriate

[specify assumptions] knowledge of valuation techniques.
that are inappropriate, (Preventative)
lack sufficient basis, or
lack sufficient support.
Disposal of Fixed The entity incorrectly Completeness All fixed assets disposals and supporting
assets records the disposal of documentation are reviewed and
fixed assets for assets still approved by management prior to the
owned by the entity. journal entry being recorded.
(Preventative)
AND/OR
Periodic counts of fixed assets are
performed. Selections made from the
floor are reconciled to the fixed assets
register, and differences are investigated
and resolved. (Detective)
Disposal of Fixed Disposals of fixed assets Valuation and Finance personnel obtain supporting
assets are recorded in the general Allocation documentation for all fixed assets
ledger at incorrect amounts. disposals and prepare the related journal
entry. Supporting documentation and
the journal entry are reviewed and
approved by management prior to the
journal entry being recorded.
(Preventative)
AND/OR
Management periodically compares
actual fixed assets disposals to budget.
Significant differences or discrepancies
are investigated and resolved
(Detective)
56
Fixed Assets

Depreciating CWIP is not transferred to Valuation and Operations management periodically Depreciation and
Fixed assets fixed assets when the asset Allocation reviews the listing of CWIP assets and amortisation expense
is placed into service and communicates to accounting [Completeness;
therefore is not depreciated. management any CWIP assets that have Accuracy;
been put into service. (Detective) Classification]
57
Goodwill and Intangible Assets

Transaction Misstatement (“What Could Other Affected actually performed
Type Go Wrong”) Assertion(s) Example Control(s) Account(s) by IOTAEC

Recording Intangibles for which no future  Existence Finance personnel periodically Other expenses
Intangible Assets economic benefit is expected:  Valuation and reconcile intangible asset balances
Allocation to supporting documentation; [Completeness]
 Are recorded management reviews and
 Are recorded in excess of approves the reconciliations,
the asset amount rather than including supporting
as an other expense.
documentation for account
transactions. Unusual transactions
or invalid reconciling items are
investigated and resolved on a
timely basis and adjusted to other
expense. (Detective)
AND/OR
Finance personnel maintain a Other expenses

listing of recorded goodwill and
intangible assets. The listing is [Completeness]
reviewed by operational
management, including in-house
legal counsel, as appropriate, for
existence and completeness.
resolved on a timely basis and
adjusted to other expense.
(Detective)
Goodwill and Goodwill and intangible assets  Existence; Finance personnel periodically
Intangible Asset included in the valuation Completeness; reconcile intangible asset balances
analysis: Rights and to supporting documentation;
58

Valuation  Do not reconcile to the Obligations; management reviews and

subsidiary ledger and/or the Valuation and approves the reconciliations,
reconciliation contains Allocation including supporting
invalid items.  Existence; Rights documentation for account
 Do not exist or the entity no and Obligations transactions. Unusual transactions
longer has rights to such  Completeness; or invalid reconciling items are
assets Rights and investigated and resolved on a
 Do not include all goodwill Obligations timely basis and adjusted to other
and intangible assets.
AND/OR
Finance personnel maintain a

listing of recorded goodwill and
intangible assets. The listing is
reviewed by operational
management, including in-house
legal counsel, as appropriate, for
existence and completeness.
resolved on a timely basis and
adjusted to other expense.
(Detective)
Goodwill Reporting units are incorrectly Valuation and Finance personnel prepare
Valuation identified or inappropriately Allocation documentation with reference to
aggregated for purposes of the the applicable accounting
goodwill impairment test. framework and principle
addressing the identification of the
entity’s reporting units and the
assets and liabilities underlying
each reporting unit. The
documentation is reviewed and
59

approved by management before

the entity performs the goodwill
impairment test. (Preventative)
Amortisation of Intangible assets are amortised Valuation and On a periodic basis, finance Depreciation and
Intangible Assets using an inappropriate useful Allocation personnel analyse intangible assets amortisation
life or method that is for the best estimate of useful lives, expense
inappropriate under the and an amortisation method that
circumstances. reflects the pattern in which [Accuracy]
economic benefits of the intangible
asset are consumed or otherwise used
up. Management reviews and
approves the analysis and supporting
AND/OR
On a periodic basis, management Depreciation and

performs a retrospective analysis amortisation
of intangible assets that have been expense [Accuracy]
fully amortised in prior periods to
challenge the useful lives and
methodology being applied to
intangible assets. (Detective)
Amortisation of Amortisation is not calculated Existence Management reviews intangible Depreciation and
Intangible Assets for all recorded intangible asset additions for appropriate amortisation
assets. assignment of useful lives and expense
methodology, and performs a [Completeness]
periodic review of useful lives and
amortisation methodology for all
intangible assets for ongoing
60

appropriateness. (Detective)
Amortisation of Amortisation is recorded for Completeness; Rights Finance personnel periodically Depreciation and
Intangible Assets intangible assets that have been and Obligations reconcile intangible asset amortisation
disposed, fully amortised, or for balances, and related amortisation, expense
which the entity does not have to supporting documentation; [Occurrence]
legal ownership. management reviews and
approves the reconciliations,
including supporting
Goodwill and Management uses a valuation Valuation and Management reviews the Other expenses
Intangible Asset technique that is inappropriate Allocation calculations performed and
Valuation under the circumstances or only assumptions used within the [Accuracy]
utilises a single valuation goodwill impairment assessment
technique for circumstances that for consistency with commonly
indicate multiple valuation accepted valuation practices,
techniques are appropriate.
prior-year assumptions, and
publicly available peer company
and industry information.
(Preventative)
Goodwill and Management’s impairment Valuation and Finance management reviews the Other expenses
Intangible Asset assessment uses business and Allocation business assumptions (including
Valuation valuation assumptions that are the reporting unit carrying [Accuracy]
not based on its best and most amounts and assessment date) for
supportable estimates. appropriateness prior to being
provided to management’s
61

valuation expert. (Preventative)
AND/OR
Management from different areas Other expenses

of the entity meet to review the
forecast for appropriateness using [Accuracy]
historical performance, their
knowledge of the entity’s strategic
plans, industry projections, and
peer company data.
(Preventative)
AND/OR
Management reviews the Other expenses
calculations performed and
assumptions used within the [Accuracy]
goodwill impairment assessment
for consistency with commonly
accepted valuation practices,
(Preventative)

Recording Goodwill acquired in business  Existence; Controls will vary by entity.
Goodwill acquisitions is: Completeness
 Valuation and
 Not appropriately recorded Allocation
in the year of the
acquisition
62

 Recorded at the incorrect

amount.
Recording The entity inappropriately Existence Finance personnel with the Other expenses
Intangible Assets capitalises costs related to requisite expertise and knowledge
internally developed intangible of the applicable accounting [Completeness]
assets rather than expense such framework, review costs incurred
costs. related to intangible assets.
Supporting documentation and the
journal entry are prepared by
finance personnel, and reviewed
and approved by management
AND/OR
Finance personnel reconcile Other expenses
intangible asset balances to
supporting documentation. [Completeness]
activity. Unusual activity or
invalid reconciling items are
Recording Internally developed intangible Completeness; Finance personnel with the Other expenses
Intangible Assets assets (e.g., copyrights, Valuation and requisite expertise and knowledge
trademarks, patents) are Allocation of the applicable accounting [Occurrence]
inappropriately recorded as framework, review costs incurred
expenses. related to intangible assets.
Supporting documentation and the
63

journal entry are prepared by

finance personnel, and reviewed
and approved by management
Recording Intangible assets acquired are:  Existence Controls will vary by entity.
Intangible Assets  Completeness
 Recorded for intangible  Valuation and
assets not acquired Allocation
 Not recorded  Valuation and
 Not recorded at the correct Allocation
amount
 Not assigned an appropriate
useful life
Recording Rights to intangible assets Existence; On a periodic basis, finance
Intangible Assets offered as security for debt no personnel assess compliance with
longer exist. Rights and Obligations debt covenants and changes in
rights to assets offered as security.
This assessment, along with
supporting documentation and the
journal entry, if necessary, is
reviewed by management before
(Preventative)
Goodwill and Management does not obtain an Valuation and Management reviews the data
Intangible Asset appropriate understanding or Allocation used and calculations performed
Valuation perform a review of the work of by management’s valuation expert
management’s expert, thereby for accuracy and consistency with
evidencing a lack of appropriate cash flow information provided.
responsibility over the (Preventative)
projections made and
64

assumptions used. AND/OR
Management reviews the

calculations performed and
assumptions used within the
goodwill impairment assessment
for consistency with commonly
accepted valuation practices,
(Preventative)
Disposing Goodwill and intangible assets Existence; On a periodic basis, finance

Goodwill and disposed in a sale transaction Rights and Obligations personnel obtain contracts and
Intangible Assets are not removed from the other documentation related to
general ledger. 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
(Preventative)
AND/OR
On a periodic basis, finance
personnel reconcile goodwill and
intangible asset balances to
supporting documentation.
65


Disposing The entity incorrectly records the Completeness; Rights All transactions involving goodwill
Goodwill and disposal of goodwill or intangible and Obligations; and intangible asset disposals and
Intangible Assets assets when rights to those assets Valuation and Allocation supporting documentation are
still exist. reviewed and approved by
management prior to the journal
entry being recorded. (Preventative)
AND/OR

personnel roll forward and reconcile
goodwill and intangible asset
balances to supporting
documentation. Management
reviews and approves the roll
forward and reconciliation, including
supporting documentation for
account transactions. Unusual
activity or invalid reconciling items
are investigated and resolved on a
66
Trade payables
Trade payable

Class of Misstatement (“What Other Affected actually performed
Transaction Could Go Wrong”) Assertion(s) Example Control(s) Account(s) by IOTAEC

Recording Goods received by, or  Completeness Trade payables and other expenses are Other expenses
Payables services rendered to,  Valuation and recorded automatically by the ERP
the entity are: Allocation system upon matching the purchase [Completeness;
order, completed vendor work order, or Accuracy]
 Not recorded in GRN. (Preventative)
trade payables or
other expenses AND/OR
 Recorded at the
incorrect amount. On a periodic basis, finance personnel Other expenses
review open purchase orders and record
other expenses and accrued payables for [Completeness;
goods received or services rendered for Accuracy]
which a completed service order or
vendor invoice has not been received.
The journal entry and supporting
documentation are reviewed and
approved by management before the
journal entry is recorded. (Preventative)
AND/OR
On a periodic basis, management Other expenses

compares actual results with budgeted
and prior-year amounts; significant [Completeness;
and/or unusual differences are Accuracy]
investigated and resolved. (Detective)
Recording The reconciliation Existence; On a periodic basis, finance personnel

Payables between the trade Rights and perform a reconciliation of the trade
payables sub-ledger Obligations; payables sub-ledger to the general
and the general ledger Completeness; ledger. Management reviews and
67
Trade payable

may contain invalid Valuation and approves the reconciliation and any
reconciling items, Allocation reconciling items are reviewed and
which may result in a addressed on a timely basis. (Detective)
misstatement of trade
payables.
Recording Amounts recorded to Existence Trade payables and other expenses are Other expenses
Payables trade payables and recorded automatically by the ERP
other expenses do not system upon matching the purchase [Occurrence]
relate to goods or order, completed vendor work order, or
services received. GRN. (Preventative)
AND/OR
Manual journal entries to trade payables, Other expenses

inventory, or other expenses, including
period-end payable accruals and [Occurrence]
supporting documentation, are reviewed
and approved by management before the
Recording Inventory and trade Existence; Rights and Inventory and trade payables entries are Inventory
Payables payables are recorded Obligations recorded automatically by the ERP
prior to receipt and/or system upon matching the purchase [Existence; Rights and
title transfer of the order and GRN. (Preventative) Obligations]
inventory.
AND/OR
Management reviews and approves the Inventory

journal entry and supporting
documentation for inventory and trade [Existence; Rights and
payables recorded for goods not yet Obligations]
received, but title has transferred to the
entity. (Preventative)
AND/OR
68
Trade payable

Physical inventory is counted Inventory

investigated and corrected within the [Existence; Rights and
inventory records. Inventory records Obligations]
reconciled to the general ledger with any
differences being recorded as a book-to-
physical inventory adjustment.
(Detective)
AND/OR
On a periodic basis, finance personnel Inventory
inventory and accrued payables for [Existence; Rights and
goods received or for goods not yet Obligations]
received where title has transferred to
the entity. The journal entry and
supporting documentation is reviewed
Recording Inventory and trade Valuation and Inventory and trade payables entries are Inventory
Payables payables are recorded Allocation recorded automatically by the ERP
at the incorrect amount. system upon matching the purchase [Valuation and
order and GRN. (Preventative) Allocation]
Recording Acquisitions of fixed Completeness A 3-way match process is performed Cash

Payables assets are not recorded. for fixed assets purchases that utilise [Existence]
the purchase order, GRN, and vendor
invoice. Once the 3-way match process Fixed assets
is performed and the key terms of the [Completeness]
purchase are agreed to supporting
documentation, a transaction is posted
in the fixed assets sub-ledger and
general ledger to record the addition.
(Preventative)
69
Trade payable

AND/OR
Periodic counts of fixed assets are Cash
performed. Selections are made from the [Existence]
floor and reconciled to the fixed assets
register, and any differences are Fixed assets
investigated and resolved. (Detective) [Completeness]
Recording Inventory is received Completeness Inventory and trade payables entries are Inventory
Payables and not recorded in the automatically recorded by the ERP
inventory system. system upon matching the purchase [Completeness]
order and GRN. (Preventative)
AND/OR
Physical inventory is counted Inventory

reconciled to the general ledger with any
differences being recorded as a book-to-
physical inventory adjustment.
(Detective)
AND/OR
On a periodic basis, finance personnel Inventory

inventory and accrued payables for [Completeness]
goods received or for goods not yet
received where title has transferred to
the entity. The journal entry and
70
Trade payable

Recording Cash disbursements  Existence; Cash disbursements are generated Cash

Disbursements are: Rights and through the ERP system. The ERP
Obligations system automatically records the journal [Existence; Rights and
 Not recorded  Completeness entry for cash disbursements to the trade Obligations;
 Recorded in the  Valuation and payables and cash sub-ledgers. Completeness;
general ledger Allocation (Preventative) Valuation and
when no cash Allocation]
disbursement has
been made AND/OR
 Recorded at the
incorrect amount. All manually generated cheques, Cash
including supporting documentation and
the related journal entry, are reviewed [Existence; Rights and
and approved by management before the Obligations;
journal entry is recorded. (Preventative) Completeness;
Valuation and
Allocation]
AND/OR

general ledger regularly, and differences
are investigated and resolved on a timely [Existence; Rights and
basis. (Detective) Obligations;
Completeness;
Valuation and
Allocation]
Recording Debit Inventory returned to  Existence; The ERP system automatically records Inventory
Memos suppliers is: Rights and entries to reduce inventory and trade
 Not removed from Obligations payables per the sub-ledgers upon [Existence; Rights and
the inventory and  Valuation and matching the goods return order, Obligations;
shipping document, and debit memo, Valuation and
71
Trade payable

trade payables Allocation completing a 3-way match. Allocation]

records (Preventative)
 Recorded at the AND/OR
incorrect amount.
Inventory returned to suppliers is Inventory
separately logged. On a periodic basis,
the return log is utilised to verify [Existence; Rights and
inventory is removed and trade payables Obligations;
is reduced for inventory returned to Valuation and
suppliers. (Detective) Allocation]
Recording Debit Inventory recorded as Completeness Inventory returned to suppliers is Inventory

Memos returned to vendors separately logged. On a periodic basis,
(removed from the the return log is utilised to verify [Completeness]
inventory and trade inventory is removed and trade payables
payables records) is not is reduced for inventory returned to
actually returned. suppliers. (Detective)
Recording Inventory and trade Completeness Management reviews and approves the Inventory
Payables payables are not journal entry and supporting [Completeness]
recorded upon transfer documentation for inventory and trade
of ownership prior to payables recorded for goods not yet
actual receipt. received, but title has transferred to the
entity.
(Preventative)
Recording The trade payables Existence New vendors to be added to the vendor
Payables balance includes master file are submitted to the
amounts due to accounting function by purchasing
unauthorised vendors. personnel. New vendors are
independently verified by the accounting
function for appropriateness and
vendor is added to the vendor master
72
Trade payable

file. (Preventative)
AND/OR
Trade payables and other expenses are

recorded automatically by the ERP
system upon matching the purchase
order, completed service order, and the
invoice received, completing a 3-way
match. Completed matches are only
posted for those vendors included in the
vendor master file. (Preventative)
Recording Foreign trade payables Valuation and On a periodic basis, a schedule of all
Payables are translated using an Allocation foreign trade payables is prepared by
incorrect foreign accounting personnel reflecting the
exchange rate. foreign trade payables, the applicable
foreign exchange rate at period-end, and
the foreign currency adjustment to be
recorded. The schedule, supporting
documentation, and journal entry are
reviewed and approved by management
before the foreign exchange adjustment
AND/OR
The ERP system automatically

calculates the translation amounts for
foreign trade payables and other
expenses, which is independently
verified by management. (Preventative)
Recording Debit Volume or purchase Valuation and On a periodic basis, purchasing provides Inventory
Memos discounts from Allocation the accounting function with analysis of
[Valuation and
73
Trade payable

suppliers are recorded inventory purchases related to all Allocation]

in improper accounts supplier volume/discount agreements.
(e.g., cost of sales, Accounting personnel calculate the
inventory) or at estimated volume discounts. Prior to Cost of Sales
incorrect amounts. recording the journal entry, management [Accuracy;
reviews the calculation, methodology, Classification]
significant assumptions used, supporting
documentation, and the journal entry for
accuracy and proper classification.
(Preventative)
AND/OR
Management subsequently compares Inventory
volume discount cash received to the
recorded volume rebate estimate for [Valuation and
accuracy. Discrepancies are investigated Allocation]
and corrected, as necessary. (Detective)
Cost of Sales
[Accuracy;
Classification]
Recording Debit Debit memos are Completeness; Rights The ERP system automatically records
Memos incorrectly recorded and Obligations entries to reduce inventory and trade
resulting in amounts payables per the sub-ledgers upon
removed from trade matching the goods return order,
payables when a shipping document, and debit memo,
liability still exists. completing a 3-way match.
(Preventative)
74
Control Activities
Misstatement (“What Other Affected performed by
Transaction Type Could Go Wrong”) Assertion(s) Example Control(s) Account(s) IOTAEC

Recording Provision for expenses Completeness On a periodic basis, finance personnel Other expenses
Provision for exist but are not recorded. meet with members of management (e.g.,
expenses sales, operational, human resources, legal [Completeness]
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
documentation, which are reviewed by
management before the journal entry is
Recording The entity uses an Valuation and On a periodic basis, provision for Other expenses
Provision for inappropriate Allocation expenses are recorded based on an
expenses methodology or incorrect analysis performed by qualified personnel [Accuracy]
significant assumptions at the entity or by a qualified third-party
[specify assumptions] or specialist. The methodology, significant
underlying data [specify assumptions, and underlying data used, as
underlying data] to well as the journal entry, are reviewed,
calculate and record evaluated, and approved by management
provision for expenses. with appropriate knowledge before the
AND/OR
retrospectively reviews prior-year
provision for expenses; including the [Accuracy]
methodology used, significant
assumptions utilised, and the underlying
data relied upon in developing such
75
Control Activities
estimates. Revisions are made to the

methodology or significant assumptions
and underlying data used in the current-
period estimation process as necessary.
(Detective)
Recording Accruals and other Existence; Finance personnel prepare the journal Other expenses
Provision for expenses are initially entry, supporting documentation, and
expenses recorded when no liability Rights and account analysis to record provision for [Occurrence]
exists. Obligations expenses. Management reviews and
approves the journal entry, supporting
before the journal entry is recorded.
(Preventative)
AND/OR
On a periodic basis, finance personnel Other expenses
reconcile provision for expenses to
supporting detail. Management reviews [Occurrence]
the reconciliation and supporting
documentation, and unusual activity or
invalid reconciling items are investigated
and resolved on a timely basis. (Detective)
Adjusting Provision for expenses are Existence; On a periodic basis, finance personnel
Provision for not reversed when a Rights and meet with members of management (e.g.,
expenses liability no longer exists Obligations sales, operational, human resources, legal
(e.g., settled). counsel) to discuss developments and/or
76
Control Activities
AND/OR
On a periodic basis, management analyses
recorded provision for expenses for
ongoing relevance. Inconsistencies or
discrepancies are investigated and
Adjusting Previously recorded Completeness; On a periodic basis, finance personnel
Provision for provision for expenses are Rights and meet with members of management (e.g.,
expenses incorrectly reversed when Obligations sales, operational, human resources, legal
a liability still exists. counsel) to discuss developments and/or
expense. Finance personnel review the list
of recorded provision for expenses, and
prepare a journal entry and supporting
recorded. (Detective)
Adjusting Adjustments to provision Valuation and On a periodic basis, finance personnel
Provision for for expenses are recorded Allocation meet with members of management (e.g.,
expenses in the general ledger at sales, operational, human resources, legal
incorrect amounts. counsel) to discuss developments and/or
77
Control Activities
AND/OR
On a periodic basis, management analyses
recorded provision for expenses for
ongoing relevance. Inconsistencies or
discrepancies are investigated and
Recording Cash disbursements:  Existence; Rights Cash disbursements are generated through Cash
Disbursements  Are not recorded and Obligations the ERP system. The ERP system
 Have not been  Completeness automatically records the journal entry for [Existence; Rights
relieved from  Valuation and cash disbursements to the provision for and Obligations;
provision for Allocation expenses and cash sub-ledgers. Completeness;
expenses (Preventative) Valuation and
 Are recorded in the Allocation]
general ledger when
no cash disbursement AND/OR
has been made All manually generated cheques, including Cash
 Are recorded at the supporting documentation and the related
incorrect amount. journal entry, are reviewed and approved [Existence; Rights
by management before the journal entry is and Obligations;
recorded. (Preventative) Completeness;
Valuation and
Allocation]
AND/OR
are investigated and resolved on a timely [Existence; Rights
basis. (Detective) and Obligations;
Completeness;
Valuation and
78
Control Activities
Allocation]

Recording Accrued bonuses are Valuation and Finance personnel calculate accrued Other expenses
Provision for incorrectly calculated and Allocation bonuses based on the provisions of the
expenses recorded due to bonus program. Management reviews and [Accuracy]
misapplication of the approves the bonus calculation and journal
bonus criteria. 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
compares actual results with budgeted and
prior-year amounts; significant and/or [Accuracy]
unusual differences are investigated and
resolved. (Detective)
Recording Accrued payroll, taxes, Valuation and Finance personnel prepare the journal Cost of Sales
Provision for and other employee Allocation entry, supporting documentation, and
expenses benefit costs are recorded account analysis to record provision for [Accuracy]
at incorrect amounts. expenses. Management reviews and
documentation, and account analysis Other expenses
before the journal entry is recorded. [Accuracy]
(Preventative)
AND/OR
Management periodically reviews actual Cost of Sales
inventory, cost of sales, gross profit, and
79
Control Activities
other expense amounts in comparison to [Accuracy]

budget, historical amounts, or current-year
trends, and investigates and resolves any
Other expenses
performed at a sufficient level of detail
and disaggregation (e.g., by type of [Accuracy]
product line, type of services). (Detective)
Recording Accrued compensated Valuation and On a periodic basis, finance personnel Other expenses
Provision for absences are incorrectly Allocation calculate accrued compensated absences
expenses calculated and recorded and prepare the supporting documentation [Accuracy]
(i.e., not consistent with and related journal entry. Management,
the stated human resource including human resource management,
policy). reviews the calculation and journal entry
for consistency with the stated policy and
approves the journal entry before it is
AND/OR
compares actual results with budgeted and
prior-year amounts; significant and/or [Accuracy]
unusual differences are investigated and
80
Loans/Borrowings
Loans/Borrowings


Recording Loan agreements are Completeness New loan agreements, including
Borrowings entered into and not finance leases, or modifications to
recorded in the general existing loan agreements, are analysed
ledger. 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
Management prepares cash flow
analyses to monitor working capital.
On a periodic basis, management
compares forecasted cash position to
actual; significant and/or unusual
differences are investigated and
Recording Loan agreements are Valuation and New loan agreements, including
Borrowings entered into and are Allocation finance leases, or modifications to
recorded in the general existing loan agreements, are analysed
ledger at the incorrect by finance personnel who prepare the
amount. journal entry and supporting analysis;
management reviews and approves the
journal entry and supporting analysis
before recording the entry.
(Preventative)
Recording Loan is recorded when no Existence; New loan agreements including
Borrowings borrowing agreement has finance leases, or modifications to
been entered into or for existing loan arrangements, are
81
Loans/Borrowings

loan that is not the loan of Rights and Obligations analysed by finance personnel who
the entity. prepare the journal entry and
supporting analysis; management
reviews and approves the journal entry
and supporting analysis before
recording the entry. (Preventative)
AND/OR
Management prepares cash flow
analyses to monitor working capital.
compares forecasted cash position to
actual; significant and/or unusual
differences are investigated and
Recording Loan stated in the general Existence; On a periodic basis, finance personnel
Borrowings ledger does not reconcile Rights and Obligations; perform a reconciliation of the loan
to the supporting loan Completeness; register to the general ledger.
records, and/or the Valuation and Management reviews and approves the
reconciliation contains Allocation reconciliation and any reconciling
invalid items. items are reviewed and addressed on a
Recording Loan payments have  Existence; Rights Management with knowledge of loan Cash
Payments been: and Obligations agreements, payment schedules, and
 Completeness other debt terms, periodically reviews [Existence; Rights
 Made but are not  Valuation and the transactions within the loan and Obligations;
recorded Allocation register. Discrepancies are investigated Completeness;
 Recorded, but have and resolved on a timely basis. Valuation and
not been paid Allocation]
(Detective)
 Recorded at an
amount that differs AND/OR
82
Loans/Borrowings

from the actual Bank statements are reconciled to the Cash

amount paid. general ledger regularly and
differences are investigated and [Existence; Rights
resolved on a timely basis. (Detective) and Obligations;
Completeness;
Valuation and
Allocation]
Recording Accrued interest and Existence; Finance personnel prepare the journal
Accrued Interest Finance cost are initially entry, supporting documentation, and
recorded when no loan Rights and Obligations account analysis to record accrued
exists. finance cost. Management reviews and
(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 investigated and resolved on
a timely basis. (Detective)
Recording Accrued interest and Completeness On a periodic basis, finance personnel
Accrued finance cost exist but are meet with members of management
not recorded. (e.g., sales, operational, human
Interest 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
83
Loans/Borrowings

provision for expense. Finance

personnel prepare a journal entry and
supporting documentation, which are
reviewed by management before the
(Preventative)
Recording Accrued interest and Valuation and Finance personnel prepare the journal
Accrued Interest finance cost are recorded Allocation entry, supporting documentation, and
at incorrect amounts. account analysis to record accrued
finance cost. Management reviews and
(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)
Recording Intercompany loan Completeness; Finance personnel enter intercompany
Borrowings transactions occurred but Valuation and transactions into the ERP system
are not recorded in one of Allocation identifying the affected entities by
the subsidiary general company code. The ERP system
ledgers or are recorded at automatically records intercompany
incorrect amounts. transactions to the corresponding
entities’ general ledger.
(Preventative)
AND/OR
84
Loans/Borrowings

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
(Preventative)
AND/OR
Management with knowledge of
intercompany transactions reviews the
activity within the various
intercompany accounts. Discrepancies
or unusual activity are investigated and
Recording Finance leases for fixed Completeness New lease contracts and lease Fixed assets
Borrowings assets are incorrectly modifications are reviewed by finance
accounted for as personnel to determine whether they [Completeness]
operating leases. meet the criteria for finance or
operating lease treatment, including
reference to the appropriate accounting Other expenses
framework and principle. The journal [Occurrence]
are reviewed by management prior to
the journal entry being posted.
(Preventative)
AND/OR
New lease contracts and lease Fixed assets

modifications recorded in the lease
register are periodically reviewed by [Completeness]
85
Loans/Borrowings

been properly accounted for as a Other expenses

finance or operating lease. (Detective)
[Occurrence]
Recording Operating leases for fixed Existence New lease contracts and lease Fixed assets
Borrowings assets are incorrectly modifications are reviewed by finance
leases. meet the criteria for finance or
reference to the appropriate accounting Other expenses
framework and principle. The journal [Completeness]
are reviewed by management prior to
the journal entry being posted.
(Preventative)
AND/OR
New lease contracts and lease Fixed assets
modifications recorded in the lease
register are periodically reviewed by [Existence]
been appropriately accounted for as a
finance or operating lease. (Detective) Other expenses
[Completeness]
86
Loans/Borrowings

Recording Finance lease obligations Valuation and Finance personnel prepare the journal
Borrowings are valued and recorded Allocation entry and supporting analyses for new
using the incorrect finance leases. Management with the
interest rate. requisite expertise and knowledge of
the applicable accounting framework
and principles reviews the journal entry
and supporting analyses prior to the
(Preventative)
Recording Loan re- payments are Valuation and Bank statements are reconciled to the Cash
Payments auto-deducted from the Allocation general ledger regularly and
entity’s bank account (or differences are investigated and [Existence; Rights
otherwise made) and not resolved on a timely basis. (Detective) and Obligations]
recorded in the general
ledger. AND/OR
On a periodic basis, finance personnel Cash

perform a reconciliation of the loan
register to the general ledger. [Existence; Rights
Management reviews and approves the and Obligations]
reconciliation and any reconciling
items are reviewed and addressed on a
Recording Recorded loan obligations Rights and Obligations; Finance personnel prepare the journal
Payments are fully or partially Valuation and to record loan waiver along with
waived and the waived Allocation supporting documentation.
amount is not recorded in Management reviews and approves the
the general ledger or is journal entry and supporting
recorded at an incorrect documentation before the journal entry
amount.
87
Loans/Borrowings

AND/OR
Management with knowledge of loan

agreements, payment schedules, and
other terms, periodically reviews the
activity within the loan register.
Recording of Loan related account Valuation and The ERP system automatically
Other Loan balances or transactions Allocation calculates the foreign currency
Related denominated in foreign translation adjustment for accounts
Transactions currencies are valued and denominated in foreign currencies. The
recorded using the proposed translation adjustment is
incorrect exchange rate. independently reviewed and approved
by management prior to recording.
(Preventative)
AND/OR
Management with knowledge of loan
agreements, payment schedules, and
other terms, periodically reviews the
activity within the loan register.
88
Employee Benefits
Employee Benefits
Control Activities
Type Could Go Wrong”) Assertion(s) Example Control(s) Accounts IOTAEC

Measurement of The entity modifies or Existence; On a periodic basis, finance and human
Benefit terminates existing plans or Rights and Obligations; resource personnel meet to evaluate
Obligation creates new plans and the Completeness; changes to the entity’s employee benefit
changes are unknown to Valuation and plan structure. Changes made to existing
management and the Allocation plans or creations of new plans are
actuary. 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
Management reviews minutes from

executive, board, audit committee, and
other operational meetings to identify
actions that may affect the benefit plan
structure or significant assumptions
underlying actuarial analysis. Matters
identified are reviewed and analysed on a
timely basis as to the effect on the benefit
obligation. (Detective)
Measurement of Payroll and employee Existence; On a periodic basis, finance personnel

Benefit demographic data provided Completeness; analyse the demographic data files and
to the third-party actuary is Valuation and trace information back to source data on a
89
Employee Benefits
Control Activities
Obligation inaccurate, incomplete, or Allocation test basis. Management reviews the

includes ineligible analysis and testing results before the
employees. information is provided to the actuary.
(Preventative)
AND/OR
Demographic data maintained in the ERP

system is monitored for integrity through
user access controls and change
management procedures. Information
technology management reviews and
approves changes to user access. Changes
to employee data are reviewed and
approved by human resource personnel
independent of those who processed the
change. (Detective)
Measurement of The third-party actuary does Existence; Finance personnel review the final
Benefit not utilise the employee and Completeness; actuarial report and reconcile the key data
Obligation other data provided by the Valuation and listed in the report to the data relating to
entity or inappropriately Allocation employees and others provided to the
makes changes to the actuary. Unusual items or errors are
employee and other data investigated and corrected on a timely
when performing the basis. (Detective)
actuarial measurement.
AND/OR
90
Employee Benefits
Control Activities
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 In determining the employee  Valuation and The calculation of the employee benefit
Benefit benefit obligation: Allocation obligation is performed by a qualified
Obligation  Valuation and actuary. The methodology, significant
 The methodology used Allocation assumptions, and underlying data used are
to calculate the reviewed, evaluated, and approved by
employee benefit
management with appropriate knowledge
obligation is
of benefit plan accounting and the
inappropriate under the
circumstances. actuarial calculation. (Preventative)
 The underlying AND/OR
significant assumptions
[specify assumptions] Finance management reviews the results
are inappropriate, lack of the actuarial analysis with the actuary
sufficient basis, or lack and investigates unusual items or
sufficient support. relationships. Management approves the
analysis before the journal entry is
Measurement of The entity inappropriately Valuation and On a periodic basis, finance personnel
Benefit relies upon the findings of Allocation obtain credentials, references, external
Obligation the third-party actuary who data, etc., and assess and conclude upon
is not adequately competent the professional competency and
or objective. objectivity of the actuary. Management
reviews this assessment and supporting
documentation and approves the
91
Employee Benefits
Control Activities
engagement of the actuary before services

are performed. (Preventative)
AND/OR
Finance personnel analyse the actuary’s

professional service engagements in
process and 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)
Recording Employee Benefit  Valuation and Finance personnel prepare journal entries Salaries & Wages
Benefit Cost obligation adjustments, Allocation to record benefit obligation adjustments,
including unrecognised  Completeness; including obtaining supporting [Valuation and
service cost or actuarial Rights and documentation (e.g., the actuarial report). Allocation;
gains and losses, are: Obligations Management reviews and approves the Completeness;
 Existence; Rights journal entry and supporting Existence; Rights
 Inaccurately recorded and Obligations documentation before the entry is and Obligations]
 Not recorded for all recorded. (Preventative)
benefit plans
 Recorded for benefit AND/OR
plans that are not the
obligation of the entity. Management with knowledge of benefit Salaries & wages
obligation adjustments reviews the
transactions in the benefit obligation- [Valuation and
related general ledger accounts for Allocation;
unusual transactions. Unusual transactions Completeness;
or errors are investigated and resolved on Existence; Rights
a timely basis. (Detective) and Obligations]
92
Employee Benefits
Control Activities
Transactions of Contributions, benefit Existence; Cash disbursements are generated through

Plan Assets payments, and other Rights and Obligations; the ERP system. The ERP system
transactions (as applicable) Valuation and automatically records the journal entry for
are made but are not Allocation cash disbursements to the benefit
recorded through the benefit obligation account and cash sub-ledgers.
obligation account. (Preventative)
AND/OR
All manually generated cheques, including

the related journal entry and supporting
documentation, are reviewed and
AND/OR
Bank statements are reconciled to the

are investigated and resolved on a timely
basis. (Detective)
Activity of Plan Contributions, benefit Completeness; Cash disbursements are generated through
Assets payments, and other Valuation and the ERP system. The ERP system
transactions (as applicable) Allocation; automatically records the journal entry for
are recorded through the Rights and Obligations cash disbursements to the benefit
benefit obligation account obligation account and cash sub-ledgers.
that did not occur. (Preventative)
AND/OR

93
Employee Benefits
Control Activities

AND/OR

basis. (Detective)
Activity of Plan Contributions, benefit Valuation and Cash disbursements are generated through
Assets payments and other Allocation the ERP system. The ERP system
transactions (as applicable) automatically records the journal entry for
made to the benefit plan are cash disbursements to the benefit
recorded at an amount that obligation account and cash sub-ledgers.
differs from the actual (Preventative)
amount paid.
AND/OR

AND/OR

basis. (Detective)
94
Employee Benefits
Control Activities

Termination For benefits given to Completeness Operational changes (e.g., plant closures,
benefits employees that qualify as voluntary lay-offs, terminations) and plan
special termination benefits, amendments are reviewed by finance
the entity does not record an personnel with the requisite expertise and
expense/liability as per the knowledge of the applicable accounting
requirements of AS 15. framework and principles. Finance
personnel assess the effect of the
operational changes or amendments on the
entity’s financial statements, including
reference to the appropriate accounting
framework and principles. The assessment
and supporting documentation are
(Preventative)
Measurement of An event occurs that Existence; Management (1) reviews minutes from
Benefit significantly reduces the Rights and Obligations; executive, board, audit committee, and
Obligation number of years of expected Valuation and other operational meetings to identify
future service, or eliminates Allocation operational changes or events that may
the accrual of benefits for a have an effect on existing benefit plans
significant number of and the entity’s financial statements and
employees, but the event is (2) communicates the changes or events to
not known to management the actuary. (Preventative)
or the actuary and the effect
on the benefit obligation is
not analysed.
Activity of Plan The entity makes lump sum Existence; On a periodic basis, finance personnel
Assets payments to plan Rights and Obligations; review minutes from executive, board,
95
Employee Benefits
Control Activities
participants in exchange for Valuation and audit committee, and other operational
their rights to receive future Allocation meetings to identify actions and initiatives
benefits and the effect on that may affect the benefit obligation,
the benefit obligation is not benefit plan structure, or significant
recognised or accounted for assumptions underlying actuarial analyses,
by management. etc. Matters identified are reviewed and
analysed on a timely basis as to the effect
on the benefit obligation. (Preventative)
96
Income Taxes
Deferred Taxes
Deferred Taxes
Control Activities

Calculate and Permanent differences are:  Existence; Deferred tax calculation and journal entry Income Tax
Record Deferred  Incorrectly classified Completeness to record deferred taxes are (1) prepared Expense (Benefit)
Income Tax as timing differences,  Valuation and by personnel with sufficient training and [Occurrence;
Assets and and vice versa Allocation experience and (2) independently Completeness;
Liabilities  Recorded at the reviewed by management. (Preventative) Accuracy]
incorrect amount. AND/OR
Tax function obtains supporting Income Tax
documentation and analyses for Expense (Benefit)
permanent and timing differences in the [Occurrence;
general ledger accounts and independently Completeness;
evaluates and tests the data for proper Accuracy]
inclusion and completeness.
(Preventative)
Calculate and Transactions with a Completeness A listing of all types of transactions or Income Tax
Record Deferred deferred income tax events affecting the income tax provision Expense (Benefit)
Income Tax impact are not considered and related deferred income tax accounts [Completeness]
Assets and when calculating deferred is utilised to compare captured data and
Liabilities tax balances. information for completeness.
(Preventative)
AND/OR
The tax department and finance Income Tax
department meet on a regular basis to Expense (Benefit)
discuss changes in the business. Changes [Completeness]
that may have an effect on deferred
income taxes and income tax expense are
97
Deferred Taxes
Control Activities
analysed and the conclusions are
documented. (Detective)
Calculate and Provision to return Valuation and Tax department of the entity compares Income Taxes
Record Deferred adjustments are not Allocation amounts in the tax return to the amounts Payable/
Income Tax recorded. included in the prior-year income tax Receivable
Assets and provision and records adjustments to the [Valuation and
Liabilities deferred tax accounts, income taxes Allocation]
payable/refund receivable, and income tax
expense as applicable. (Preventative) Income Tax
Expense (Benefit)
[Accuracy]
Calculate and Tax rate applied in taxable Valuation and Deferred taxes calculation and journal Income Tax
Record Deferred income and deferred tax Allocation entry to record deferred taxes are (1) Expense (Benefit)
Income Tax calculation is incorrect. prepared by personnel with sufficient [Accuracy]
Assets and training and experience and (2)
Liabilities independently reviewed by management.
(Preventative)
AND/OR
Deferred taxes are processed using a Income Tax

software program. Program’s algorithms, Expense (Benefit)
calculations, etc., are tested by the entity [Accuracy]
for accuracy. New releases or updates to
the software are separately tested and
incorporated on a timely basis.
(Preventative)
Calculate and Recent amendments to the Valuation and Income taxes are processed using a Income Tax
Record Deferred income tax code are not Allocation software program that draws financial and Expense (Benefit)
Income Tax reflected in the tax data from the ERP system. Program’s [Accuracy;
98
Deferred Taxes
Control Activities
Assets and determination of income algorithms, calculations, etc., are tested Completeness;
Liabilities tax expense and deferred for accuracy. New releases or updates to Occurrence]
taxes. the software are tested prior to
implementation and are implemented on a Income Taxes
timely basis. (Preventative) Payable/
Receivable
[Valuation and
Allocation;
Completeness;
Existence]
AND/OR
The tax department of the entity agrees the Income Tax
tax rate utilised in determining income tax Expense (Benefit)
expense to the enacted rate as per the [Accuracy;
Income Tax Act, 1961 and considers Completeness;
whether there are substantively enacted Occurrence]
tax rates that will affect the balance of
deferred taxes. (Preventative) Income Taxes
Payable/
Receivable
[Valuation and
Allocation;
Completeness;
Existence]
Calculate and Tax journal entries are Valuation and Journal entries to record the adjustments
Record Deferred posted at incorrect Allocation to the income tax accounts have adequate
Income Tax amounts to the general supporting documentation and are
Assets and ledger. independently reviewed and approved
Liabilities prior to recording. (Preventative)
99
Deferred Taxes
Control Activities
Calculate and The entity’s assessment Valuation and Processes exist whereby accounting and Income Tax
Record Deferred that there is Allocation tax personnel jointly identify and assess Expense (Benefit)
Income Tax reasonable/virtual available sources of taxable income,
Assets and certainty that sufficient including assessing and weighing all [Accuracy]
Liabilities future taxable income will positive and negative evidences. The
be available against which analysis and conclusion are reviewed and
the deferred tax assets can
approved by management prior to the
be realised is not
appropriate.
(Preventative)
AND/OR
Financial forecasts are prepared by Income Tax
accounting personnel with an appropriate Expense (Benefit)
level of knowledge of accounting [Accuracy]
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)
Calculate and Deferred income tax Existence; Deferred taxes calculation and journal Income Tax
Record Deferred amounts recorded in the Completeness; Rights entry to record deferred taxes are (1) Expense (Benefit)
Income Tax general ledger contains and Obligations; prepared by personnel with sufficient [Occurrence;
Assets and invalid items. Valuation and training and experience and (2) Completeness;
Liabilities Allocation independently reviewed by management. Accuracy;
(Preventative) Classification]
AND/OR
100
Deferred Taxes
Control Activities
Deferred taxes are processed using a Income Tax
software program. Program’s algorithms, Expense (Benefit)
calculations, etc., are tested by the entity [Occurrence;
for accuracy. New releases or updates to Completeness;
the software are separately tested and Accuracy;
incorporated on a timely basis. Classification]
(Preventative)
101
Provision for Income taxes/ Advance Income taxes
Control
Activities
Transaction Misstatement (“What Could Other Affected performed by
Type Go Wrong”) Assertion(s) Example Control(s) Accounts IOTAEC

Calculate and Estimated Advance income tax  Existence Tax department of the entity prepares
Record payments made are:  Valuation and estimated tax payment calculations on a
Provision for  Not recorded Allocation quarterly basis and maintains an income
income taxes or  Recorded at incorrect tax payment schedule. Payments as per the
Advance Taxes. amounts. payment schedule are compared to the
actual payment recorded in the general
ledger and investigated for proper
recording. (Detective)
AND/OR
Bank statements are reconciled

periodically, and reconciling items are
investigated for proper recording in the
general ledger. (Detective)
Calculate and Income  Valuation and The calculation is prepared by staff with Income Tax
Record tax/deduction/exemption is Allocation; sufficient training and experience. Expense (Benefit)
Provision for incorrectly calculated due to: Completeness Calculations and supporting analyses are
income taxes or  Exclusion of valid tax  Existence independently reviewed by management. [Accuracy;
Advance Taxes deductions or exemptions (Preventative) Completeness;
or under-recorded tax Occurrence]
deductions or exemptions
 Inclusion of invalid tax AND/OR
deductions or exemptions
or over-recorded Deductions taken on the prior-year tax Income Tax
deductions or exemptions. return are reconciled to the current-year
102
Control
Activities
income tax calculation and significant Expense (Benefit)
differences are investigated. (Detective)
[Accuracy;
Completeness;
Occurrence]
Calculate and Calculation of income tax Completeness Tax department of the Company reviews Income Tax
Record expense/deductions/exemptions the list of countries where the company Expense (Benefit)
Provision for does not include all has business operations with the
income taxes or jurisdictions. marketing department and also with other [Completeness]
Advance Taxes relevant department in order to identify
foreign jurisdictions where obligation to
pay income tax may arise. (Preventative)
AND/OR
Listing of all taxable subsidiaries and Income Tax

other legal entities affecting income tax is Expense (Benefit)
compared to the income tax calculation for
completeness. (Detective) [Completeness]
AND/OR
The tax department and finance Income Tax

department meet on a regular basis to Expense (Benefit)
discuss changes in the business. Changes
that may have an effect on deferred [Completeness]
income taxes and income tax expense are
analysed and the conclusions are
103
Control
Activities
documented. (Detective)
Calculate and Tax adjustments, penalties, or  Completeness Journal entries to record tax and related Income Tax
Record interest resulting from income  Valuation and penalties and interest as a result of income Expense (Benefit)
Provision for tax assessment orders/appellate Allocation tax assessment orders/appellate orders are
income taxes or orders are: prepared by tax personnel on a timely [Completeness;
Advance Taxes  Not recorded basis. Entries are reviewed and approved Accuracy]
 Inaccurately recorded. by management prior to the journal entry
being recorded. (Preventative)
AND/OR
On a periodic basis, tax department of the Income Tax

entity provides status updates to finance Expense (Benefit)
management on income tax
assessments/appellate orders and inquiries [Completeness;
with respect to Income tax assessment Accuracy]
years open, for proper accounting
treatment. (Detective)
Calculate and Provision for income tax to Valuation and Tax department of the entity compares Deferred Taxes
Record Income tax return adjustments Allocation amounts in the tax return to the amounts [Valuation and
Provision for is not recorded. included in the previous financial year Allocation]
income taxes or income tax provision and records
Advance Taxes adjustments to the deferred tax accounts, Income Tax
income taxes. (Preventative) Expense (Benefit)
[Accuracy]
104
Control
Activities
Calculate and Recent amendments to the Completeness; Income taxes are processed using a Income Tax
Record income tax (domestic or Existence; software program which draws financial Expense (Benefit)
Provision for international) are not reflected Valuation and and tax data from the ERP system.
income taxes or in the determination of income Allocation Program’s algorithms, calculations, etc., [Accuracy;
Advance Taxes tax and deferred taxes. are tested for accuracy. New releases or Completeness;
updates to the software are tested prior to
implementation and are implemented on a Occurrence]
timely basis. (Preventative)
Deferred Taxes
[Valuation and
Allocation]
AND/OR
The tax department of the entity agrees the Income Tax

tax rate utilised in determining income tax Expense (Benefit)
to the enacted rate as per the Income Tax
Act, 1961 and considers whether there are [Accuracy;
substantively enacted tax rates that will Completeness;
affect the balance of deferred taxes.
(Preventative) Occurrence]
Deferred Taxes
[Valuation and
Allocation]
105
Control
Activities
Calculate and Sales, purchases, and other Existence; Management establishes policies for Income Tax
Record transactions with Associated Completeness; Rights transactions to associated enterprises. This Expense (Benefit)
Provision for enterprises are not at arm’s and Obligations policy covers all terms and conditions,
income taxes or length, resulting in concern including the price to be charged. The [Occurrence;
Advance Taxes regarding transfer pricing policy is reviewed and monitored by the Completeness]
matters. tax department of the entity in order to
identify potential transfer pricing
considerations. Transactions between
associated enterprises entities strictly
adhere to this policy. (Preventative)
106
Share Capital and Reserves and Surplus
Share Capital


Issue of Share Subscribed and fully paid  Existence Finance personnel prepare the journal
Capital up share capital are:  Completeness entry, supporting documentation, and
 Valuation and account analysis to record subscribed
 Recorded for Allocation and paid up share capital. Management
transactions that did reviews and approves the journal entry,
not occur
supporting documentation, and account
 Not recorded for
transactions that did
occur recorded. (Preventative)
incorrect amount.
Management with knowledge of the
entity’s share capital transactions and
share capital account activity reviews
the share capital accounts for
unrecorded or inaccurately recorded
transactions. Unusual activity or errors

Issue of Share Options/Rights exercised Existence Finance personnel prepare the journal
Capital and purchases of shares of entry, supporting documentation, and
are recorded in the Share account analysis to record subscribed
capital accounts for and paid up share capital. Management
transactions that did not reviews and approves the journal entry,
occur. supporting documentation, and account
107
Share Capital

AND/OR

Issue of Share Options/Rights to  Completeness Finance personnel prepare the journal

Capital purchase shares are  Valuation and entry, supporting documentation, and
exercised, or shares are Allocation account analysis to record subscribed
purchased through an and paid up share capital. Management
employee stock option reviews and approves the journal entry,
plan, but are: supporting documentation, and account
 Not recorded in the recorded (Preventative)
equity accounts
incorrect amount.
Buyback of Buyback of shares are not Existence; Finance personnel prepare the journal
Shares recorded. Rights and Obligations entry, supporting documentation, and
account analysis to record subscribed
and paid up share capital including buy
back of shares. Management reviews
and approves the journal entry,
108
Share Capital

recorded (Preventative)
AND/OR

AND/OR

Buyback of Buyback of shares are Completeness Finance personnel prepare the journal
Shares recorded for transactions entry, supporting documentation, and
that did not occur. account analysis to record subscribed
and paid up share capital including buy
back of shares. Management reviews
and approves the journal entry,
recorded (Preventative)
AND/OR

109
Share Capital


Distribution of Dividends are declared but Existence; Finance personnel prepare the journal
Dividends not recorded. Rights and Obligations entry, supporting documentation, and
account analysis to record dividends.
Management reviews and approves the
journal entry, supporting
(Preventative)
Distribution of Dividends are distributed Existence; Bank statements are reconciled to the
Dividends but not recorded. Rights and Obligations general ledger regularly and differences
AND/OR

Distribution of Dividends are recorded Completeness Finance personnel prepare the journal
even though no dividends entry, supporting documentation, and
110
Share Capital

Dividends have been declared or account analysis to record dividends.

distributed. Management reviews and approves the
(Preventative)
AND/OR

entity’s equity transactions and share
capital account transactions reviews the
accounts for unrecorded or inaccurately
recorded transactions. Unusual
transactions or errors are investigated
and resolved on a timely basis.
(Detective)
Distribution of Dividends are inaccurately Valuation and Finance personnel prepare the journal
Dividends calculated and recorded. Allocation entry, supporting documentation, and
account analysis to record dividends.
Management reviews and approves the
(Preventative)
AND/OR

entity’s share capital and dividend
transactions reviews such accounts for
111
Share Capital


Foreign Currency Foreign currency Existence The ERP system automatically

Translation translation adjustments are calculates the foreign currency
Adjustments not recorded in the general translation adjustment for accounts
ledger. denominated in foreign currencies. The
proposed translation adjustment is
independently reviewed and approved
by management prior to recording.
(Preventative)
AND/OR

entity’s share capital transactions
reviews the share capital for unrecorded
or inaccurately recorded transactions.
Unusual activity or errors are
basis. (Detective)
112
Revenue from Operations-Start
Revenue from Operations


Recording of Sales and trade receivables  Occurrence Invoices are generated only upon matching Trade receivable
Sales are recorded:  Accuracy the purchase order and shipping documents, [Existence;
 That do not relate to  Cutoff completing a 3-way match. The 3-way match Valuation and
valid sales/dispatches process is performed within an ERP system Allocation;
 At the incorrect that identifies the purchase order and dispatch Completeness]
amount note and generates an invoice within
 In the incorrect period. established tolerances. (Preventative)
AND/OR
Proof of delivery is provided by third-party Trade receivables
carriers for all dispatches/deliveries made. [Existence;
The proof of delivery is required in order for Valuation and
the invoice to be generated. (Preventative) Allocation;
Completeness]
Recording of Supplementary agreements Occurrence Representations are received on a quarterly Trade receivables
Sales or credit memos exist that basis from sales personnel and management [Existence]
are not known to regarding the existence of customer side
accounting. agreements or credit memos not yet
communicated to accounting. (Detective)
AND/OR
Credit notes issued after period-end are Trade receivables
scrutinised by management for association [Existence]
with supplementary agreements and proper
accounting. (Detective)
Recording of Sales are recorded prior to Occurrence Sales agreements are reviewed by personnel Trade receivable
Sales all necessary revenue with requisite experience to determine if the [Existence]
recognition criteria being revenue recognition criteria are met.
113

met.
Recording of Goods are dispatched to Completeness Dispatches of goods to customers are logged. Trade receivables
Sales customers and no invoice The log is used to determine that all [Completeness]
is generated and recorded. shipments dispatches are invoiced and that all
invoices are recorded. (Detective)
AND/OR
Management reviews relevant sales, trade Trade receivables
receivables, costs of sales, and inventory [Completeness]
reports related to order entry, dispatch, and
invoicing; significant, unusual relationships
are monitored and acted upon. (Detective)
AND/OR
Invoices are generated only upon matching
the purchase order and dispatch documents,
completing a 3-way 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)
Recording of Sales are not classified Classification Finance personnel review the nature and type
Sales appropriately as per of sale transaction and appropriate account.
Schedule III to the Management reviews the supporting
Companies Act, 2013 documentation, and journal entry before the
Sales Returns Credit notes are not issued Occurrence All returned goods are logged when received. Trade receivables
and Credit and recorded for goods Return details per the log are compared to [Existence; Rights
Memos returned by customers. credit notes issued to determine that credit and Obligations]
notes are issued in accordance with company
policy. (Detective)
AND/OR
114

All returned goods are logged when received

and the returned goods log automatically
generates the credit notes. (Preventative)
Sales Returns Credit notes are issued or Occurrence All returned goods are logged when received. Trade receivables
and Credit committed to the customer Return details per the log are compared to [Existence]
Memos but not recorded. credit notes issued and recorded to determine
that credit notes are issued in accordance with
company policy. (Detective)
AND/OR
Representations from operations and sales Trade receivables
personnel are obtained indicating that no [Existence]
verbal or unrecorded credit memos exist that
have not been reported to finance
Sales Returns Credit notes are issued to Completeness All returned goods are logged when received Trade receivables
and Credit customers without the and the returned goods log automatically [Completeness]
Memos receipt of returned goods. generates the credit notes. (Preventative)
AND/OR
All returned goods are logged when received. Trade receivables
Credit notes issued are compared to the return [Completeness]
log to determine that credits issued are for
valid returns. (Detective)
Sales Returns Credit notes are issued for Accuracy Credit notes are generated by the ERP system. Trade receivables
and Credit the incorrect amount. Credit pricing information is obtained from [Valuation and
Memos the original sales invoice. (Preventative) Allocation]
AND/OR
ERP system validates the amount of the Trade receivables
issued credit note against the original invoice. [Valuation and
Credit memos issued in excess of the original Allocation]
115

invoice are flagged and must be reviewed and

approved by management. (Preventative)
AND/OR
Policy requires that credit notes are not issued Trade receivables
in amounts in excess of the original invoice [Valuation and
amount; compliance with this policy is Allocation]
monitored by management. (Preventative)
Sales Returns Sales returns reserves are  Accuracy Sales return methodology, significant Trade receivables
and Credit not accurately estimated as  Accuracy assumptions, and supporting documentation
Memos a result of: are reviewed by management prior to [Valuation and
 An inappropriate recording the journal entry. (Preventative) Allocation]
methodology
 Significant
assumptions [specify AND/OR
assumptions] being Management performs a retrospective review Trade receivables
inappropriate, lacking supporting the appropriateness of the
sufficient basis, or methodology and significant assumptions. [Valuation and
lacking sufficient (Detective) Allocation]
support.
AND/OR
Sales returns are analysed on a monthly basis Trade receivables
and compared to budget. Explanations are
obtained for any significant variances and [Valuation and
differences. The analysis is reviewed by Allocation]
consideration when estimating the sales return
reserve. (Detective)
Sales Returns Sales return transactions Cutoff Returned goods received and credit memos Trade receivables
and Credit occurring around period- issued at, before, or after the end of an [Existence;
Memos end are not recorded in the Completeness accounting period are scrutinised and/or Completeness]
correct period. reconciled to make certain the sales return is
116

recorded in the appropriate accounting period.

(Detective)
AND/OR
Manual sales return entries made to the Trade receivables

general ledger are reviewed and approved by [Existence;
management for proper inclusion in the Completeness]
correct accounting period. (Detective)
Recording of Invoices are generated and Occurrence Invoices can only be generated for customers Trade receivables
Sales sales recorded for that exist in the customer master file. Access [Existence;
dispatches to fictitious to add, change, or delete information in the Valuation and
customers. customer master file is limited to approved Allocation]
personnel. (Preventative)
AND/OR
The customer master file generates an Trade receivables
exception report listing new and deleted [Existence;
customers, shipping address changes, etc., Valuation and
and the report is reviewed by the credit Allocation]
manager and controller. (Detective)
AND/OR
Customer master file data is periodically Trade receivables
reviewed by management for accuracy and [Existence;
ongoing pertinence. (Detective) Valuation and
Allocation]
Recording of Invoices are issued and Occurrence The ERP system only permits invoices to be Trade receivables
recorded for dispatches to issued for dispatches to valid customer [Existence]
117

Sales non-customer offsite locations based on information contained in

locations. the customer master file. (Preventative)
AND/OR
The customer master file is reviewed for Trade receivables
ongoing relevance. (Detective) [Existence]
Recording of Invoices are generated and Occurrence; Consigned inventory is confirmed and Trade receivables
Sales recorded for sales of Accuracy confirmations are reconciled to inventory [Existence;
consigned inventory based records and the general ledger. Randomly, Valuation and
on incorrect data provided consigned inventory is physically verified by Allocation]
to the entity by the company personnel. (Detective)
consignee. AND/OR
Customers who receive consigned goods are Trade receivables
specifically identified as consignment [Existence;
customers in the ERP customer master file. Valuation and
The ERP system generates a report of Allocation]
invoices to consignment customers that are
scrutinised by management for proper
revenue recognition. (Detective)
Recording of Inventory held on Completeness Consigned inventory is confirmed and Trade receivables
Sales consignment and confirmations are reconciled to inventory [Completeness]
subsequently sold has not records and the general ledger. Randomly,
been invoiced and recorded consigned inventory is physically verified by
as a sale and receivable. company personnel. (Detective)
AND/OR
Inventory consignee (third party) provides Trade receivables
periodic reporting of consigned inventory [Completeness]
held. These reports are reviewed and
reconciled to internal records, and differences
are investigated. (Detective)
Recording of Sales transactions are Accuracy; Management (1) analyses significant sales
Sales recorded without being Occurrence contracts for revenue recognition
118

appropriately adjusted for considerations such as customer approval,

unearned (or deferred) delivery terms (e.g., FOB destination), and (2)
revenue, or they are references the applicable accounting
adjusted at the incorrect framework and principles to support the
amount. amount recorded as revenue and unearned
revenue for significant sales transactions.
(Preventative)
AND/OR
Sales transactions, volumes, and values are
analysed on a monthly basis and compared to
budget. Explanations are obtained for any
variances above X% and differences are
analysed. The analysis is reviewed by senior
Recording of Sales are made to Occurrence Credit limits are established by the credit Trade receivables
Sales customers with poor credit, manager based on the customer’s ability to [Valuation and
which may affect revenue pay and past collection results, and are Allocation]
recognition criteria being reviewed on a regular basis. (Preventative)
met and the ultimate write-
off of uncollectible
accounts.
Recording of Invoices are generated in Occurrence ERP system suspends purchase orders that Trade receivables
Sales excess, individually or in individually or aggregately exceed customer [Valuation and
the aggregate, of customer credit limits. Approval by the credit manager Allocation]
credit limits, which may is required prior to the ERP system recording
affect revenue recognition the purchase order. (Preventative)
criteria being met and the
ultimate write-off of
uncollectible accounts.
Sales Returns Credit notes are issued at Completeness; Policy requires that credit notes are not issued Trade receivables
and Credit an amount in excess of the Accuracy in amounts in excess of the original invoice [Valuation and
Memos original invoice. amount; compliance with this policy is Allocation;
monitored by management via review of Completeness]
119

credit memos prior to issuance.

(Preventative)
AND/OR
ERP system validates the amount of the Trade receivables
issued credit note against the original invoice [Valuation and
and creates an exception report for credit Allocation;
notes in excess of the original invoices. Completeness]
Management reviews, then approves or
corrects, items on the exception report based
on documentation and support provided.
(Detective)
Sales Returns For sales transactions that Occurrence For sales transactions that trigger promotional Trade receivables
and Credit trigger promotional allowances or volume discounts, the [Valuation and
Memos allowances or volume calculation for promotional allowances and Allocation]
discounts, the promotional volume discounts and supporting
allowance or volume documentation are reviewed by management
discount is not prior to recording the journal entry.
appropriately recorded. (Preventative)
AND/OR
For customers receiving promotional Trade receivables
allowances or volume discounts, management [Valuation and
periodically analyses goods returned that may Allocation]
indicate inappropriate recording of
promotional allowances or volume discounts.
(Detective)
AND/OR
Promotional allowances and volume Trade receivables
discounts are analysed on a monthly basis and [Valuation and
compared to budget. Explanations are Allocation]
120

Sales Returns Provisions for promotional  Accuracy The methodology for accruing for Trade receivables
and Credit allowances or volume  Accuracy promotional allowances/volume discounts, [Valuation and
Memos discounts are not significant assumptions used, and supporting Allocation]
accurately estimated as a documentation are reviewed by management
result of: prior to recording the journal entry.
 An inappropriate (Preventative)
methodology
 Significant
assumptions [specify AND/OR
assumptions] being Management performs a retrospective review Trade receivables
inappropriate, lacking supporting the appropriateness of the [Valuation and
sufficient basis, or methodology and significant assumptions. Allocation]
lacking sufficient (Detective)
support.
AND/OR
Promotional allowances and volume Trade receivables
discounts are analysed on a monthly basis and [Valuation and
compared to budget. Explanations are Allocation]
consideration when estimating the reserve for
promotional allowances and rebates.
(Detective)
Recording of Foreign sales and trade Accuracy Foreign sales and trade receivables translation Trade receivables
Sales receivables are translated is prepared by staff personnel and [Valuation and
at the incorrect foreign reviewed/approved by management. Analysis Allocation]
exchange rate. reviewed/approved by management includes
supporting documentation for the translation
rate calculation. (Preventative)
AND/OR
ERP system calculates the foreign sales and Trade receivables
trade receivables translation, which is [Valuation and
121

independently verified by management. Allocation]

(Preventative)
122
Cost of Sales
Cost of Sales
Control Activities

Recording Cost Costs of sales are:  Occurrence Finance personnel review the nature and type
of Sales  Recorded when  Completeness of costs incurred, and code the cost to the
no sale exists  Accuracy appropriate account. Management reviews
 Not recorded  Cutoff the coding, supporting documentation, and
when sales exist  Classification journal entry before the journal entry is
 Recorded at the recorded. (Preventative)
incorrect amount AND/OR
 Recorded in the
incorrect period Management periodically reviews actual
 Incorrectly
other expense amounts in comparison to
classified.
budget, historical amounts, or current-year
trends, and investigates and resolves any
performed at a sufficient level of detail and
disaggregation (e.g., by type of product line,
type of services). (Detective)
Recording Cost Inventory may be Occurrence Cost of sales is recorded and inventory is Inventory
of Sales removed from relieved automatically by the ERP system
inventory records and upon matching the customer sales order, [Completeness]
recorded as a cost of shipping documents, and the invoice
sales when it has not generated, completing a 3-way match.
actually been sold. (Preventative)
AND/OR
Physical inventory is counted periodically

and discrepancies are investigated and Inventory
corrected within the inventory records. [Completeness]
Inventory records based on the physical
inventory are reconciled to the general ledger
123
Cost of Sales
Control Activities
with any differences being recorded as a

book-to-physical inventory adjustment.
(Detective)
Recording Cost Inventory records Completeness Cost of sales is recorded and inventory is Inventory
of Sales include inventory that relieved automatically by the ERP system
was sold to customers upon matching the customer sales order, [Existence; Rights
and not recorded as a shipping documents, and the invoice and Obligations]
component of cost of generated, completing a 3-way match.
sales. (Preventative)
AND/OR
Physical inventory is counted periodically Inventory

and discrepancies are investigated and
corrected within the inventory records. [Existence; Rights
Inventory records based on the physical and Obligations]
(Detective)
Recording Cost Inventory has been Accuracy On a periodic basis, accounting personnel Inventory
of Sales sold that is removed calculate the inventory cost under the costing
from the accounts at method utilised by the entity. Prior to [Valuation and
incorrect amounts. recording the journal entry, management Allocation]
reviews the calculation, methodology,
accuracy and proper account classification.
(Preventative)
AND/OR
Cost of sales is recorded and inventory is Inventory

relieved automatically by the ERP system
upon matching the customer sales order, [Valuation and
Allocation]
124
Cost of Sales
Control Activities
dispatch documents, and the invoice

(Preventative)
Recording Cost The entity uses Accuracy Management reviews the new standard cost Inventory
of Sales inappropriate standard analysis and supporting documentation and
costs in valuing its approves changes to standard costs, [Valuation and
inventory, including including labor and overhead allocation Allocation]
incorrectly calculating assumptions, before the changes are made to
the allocation of labor the inventory ERP system. (Preventative)
and overhead. AND/OR
Management compares the revised standard Inventory

cost master file to the approved standard cost
per the New Standard Cost Report. [Valuation and
(Preventative) Allocation
Recording Cost Inventory may be Accuracy On a periodic basis, accounting personnel Inventory
of Sales recorded at the calculate the inventory cost under the costing
incorrect cost under method utilised by the entity. Prior to [Valuation and
the entity’s costing recording the journal entry, management Allocation]
method. reviews the calculation, methodology,
accuracy and proper account classification.
(Preventative)
AND/OR
On a quarterly basis, accounting personnel Inventory

compare the costs automatically calculated
by the ERP system to manually calculated [Valuation and
inventory costs using the selected costing Allocation]
method for a sample of inventory items.
(Detective)
125
Cost of Sales
Control Activities
AND/OR
Management meets monthly in product cost Inventory
review meeting to discuss results of
operations, specifically focused on [Valuation and
production cost evaluation including a Allocation]
comparison of current-period productions
cost to the current-year budget and prior-
period benchmarks. (Detective)
AND/OR
Changes made to inventory costing methods Inventory

are approved by management before
becoming effective (Preventative) [Valuation and
Allocation]
Recording Cost Inventory that was Cutoff Cost of sales is recorded and inventory is Inventory
of Sales sold to customers and reduced automatically by the ERP system
recorded as cost of upon matching the customer sales order, [Completeness;
sales are recorded in shipping documents, and the invoice Existence; Rights
the incorrect period. generated, completing a 3-way match. and Obligations]
(Preventative)
AND/OR
corrected within the inventory records. [Completeness;
Inventory records based on the physical Existence; Rights
inventory are reconciled to the general ledger and Obligations]
(Detective)
Recording Cost Inventory stated in the Occurrence; Management reviews and approves the Inventory
of Sales general ledger does Completeness; reconciliation of the inventory records to the
126
Cost of Sales
Control Activities
not reconcile to the Accuracy; general ledger and any reconciling items are [Completeness;
inventory records Cutoff; reviewed and addressed on a timely basis. Existence; Rights
and/or the Classification; (Detective) and Obligations;
reconciliation contains Valuation and
invalid items. Allocation]
Recording Cost Inventory may be Accuracy Management reviews and approves the cost Inventory
of Sales recorded at an amount v/s NSR evaluation prepared by finance
that exceeds the lower personnel and the resulting journal entry. [Valuation and
of cost or NRV as the (Preventative) Allocation]
significant
assumptions] utilised
in the lower of cost or
NRV analysis are
inappropriate, do not
have a sufficient basis,
or do not have
sufficient support.
Recording Cost The grouping of Accuracy Management reviews and approves the cost Inventory
of Sales inventory for purposes v/s NSR evaluation prepared by finance
of applying the COST personnel and the resulting journal entry. [Valuation and
V/S NSR evaluation is (Preventative) Allocation]
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
127
Cost of Sales
Control Activities
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.
Recording Cost The adjustment for Cutoff Management reviews and approves the cost Inventory
of Sales lower of cost or NRV v/s NSR evaluation prepared by finance
is recorded in the personnel and the resulting journal entry. [Valuation and
incorrect accounting (Preventative) Allocation]
period.
Recording Cost The adjustment for Occurrence; Management reviews and approves the cost Inventory
of Sales lower of cost or NRV Accuracy; v/s NSR evaluation prepared by finance
stated in the general Completeness personnel and the resulting journal entry. [Existence; Rights
ledger does not (Preventative) and Obligations;
reconcile to the Completeness;
calculation and/or Valuation and
contains mathematical Allocation]
errors.
Recording Cost Obsolete, slow Occurrence Management reviews and approves the Inventory
of Sales moving, or excess excess and obsolete adjustment calculation
inventory does not prepared by finance personnel and resulting [Existence;
exist but an adjustment journal entry. (Preventative) Valuation and
is recorded against Allocation]
inventory and as a
component of cost of AND/OR
sales.
Management periodically reviews actual Inventory
128
Cost of Sales
Control Activities
other expense amounts in comparison to [Existence;

budget, historical amounts, or current-year Valuation and
trends, and investigates and resolves any Allocation]
performed at a sufficient level of detail and
disaggregation (e.g., by type of product line,
type of services). (Detective)
Recording Cost Obsolete, slow Completeness Management reviews and approves the Inventory
of Sales moving, or excess excess and obsolete adjustment calculation
inventory exists but no prepared by finance personnel and resulting [Completeness;
adjustment is recorded journal entry. (Preventative) Valuation and
against inventory and Allocation]
as a component of cost
of sales. AND/OR
corrected within the inventory records. [Completeness;
Inventory records based on the physical Valuation and
inventory are reconciled to the general ledger Allocation]
book to physical inventory adjustment.
(Detective)
Recording Cost In evaluating the  Accuracy Management reviews and approves the Inventory
of Sales adjustments for  Accuracy excess and obsolete adjustment calculation
obsolete, slow prepared by finance personnel and resulting [Valuation and
moving, or excess journal entry. (Preventative) Allocation]
inventory:
 Management’s
method for
determining the
E&O adjustments
is inappropriate or
has not been
129
Cost of Sales
Control Activities
applied
consistently.
 The estimates are
based on
assumptions that
are unreasonable,
lack sufficient
basis, or lack
sufficient support.
Assumptions used
in estimating
E&O adjustments
include: [specify
assumptions]
Recording Cost The calculations for Accuracy The inventory management system generates Inventory
of Sales obsolete, slow- the Inventory Usage/Movement Report based
moving, or excess on parameters in the inventory management [Valuation and
inventory and related system. (Preventative) Allocation]
adjustments are based
on inaccurate
inventory
usage/movement data.
Recording Cost The adjustment for Accuracy; Cutoff; Management reviews and approves the Inventory
of Sales obsolete, slow Classification excess and obsolete adjustment calculation
moving, or excess prepared by finance personnel and resulting [Existence;
inventory is recorded journal entry. (Preventative) Completeness;
at the incorrect Valuation and
amount, in the Allocation]
incorrect general
ledger account, or in
the incorrect
130
Cost of Sales
Control Activities
accounting period.
Recording Cost The adjustment for Occurrence; Management reviews and approves the Inventory
of Sales obsolete, slow- Accuracy; excess and obsolete adjustment calculation
moving, or excess Completeness; prepared by finance personnel and resulting [Existence;
inventory stated in the Cutoff; Classification journal entry. (Preventative) Completeness;
general ledger does Valuation and
not reconcile to the Allocation]
calculation and/or
contains mathematical
errors.
Recording Cost Physical inventory Occurrence; Physical inventory is counted periodically Inventory
of Sales counts are not Completeness; and discrepancies are investigated and [Existence; Rights
performed on a Accuracy corrected within the inventory records. and Obligations;
periodic basis, Inventory records based on the physical Completeness;
potentially resulting in inventory are reconciled to the general ledger Valuation and
inaccurate inventory with any differences being recorded as a Allocation]
records. book-to-physical inventory adjustment.
(Detective)
Recording Cost Physical inventory  Occurrence Physical inventory is counted periodically Inventory
of Sales counts:  Completeness and discrepancies are investigated and [Existence;
 Count inventory  Cutoff corrected within the inventory records. Completeness;
that does not exist  Accuracy Inventory records based on the physical Valuation and
 Do not include  Accuracy inventory are reconciled to the general ledger Allocation]
counts of all with any differences being recorded as a
inventory book-to-physical inventory adjustment.
 Do not include (Detective)
consideration of
movement of
inventory during
the physical
inventory
 Are not valued at
the appropriate
131
Cost of Sales
Control Activities
cost
 Book to physical
adjustments that
are not recorded
or recorded at the
incorrect amount.
Sales Returns Inventory returns from  Occurrence Manual journal entries to record inventory Inventory
customers are  Accuracy purchases or returns and related payable
recorded:  Cutoff adjustments are prepared by finance [Existence; Rights
 Prior to receipt personnel and supported by documentation and Obligations;
 At the incorrect that the inventory has been received or title Valuation and
amount has transferred to the entity prior to recording Allocation;
 In the incorrect the entry. Management reviews and approves Completeness]
period. the journal entry and underlying supporting
AND/OR
corrected within the inventory records. [Existence; Rights
Inventory records based on the physical and Obligations;
inventory are reconciled to the general ledger Valuation and
with any differences being recorded as a Allocation;
book-to-physical inventory adjustment. Completeness]
(Detective)
Sales Returns Goods returned by  Completeness Warehouse personnel enter all goods Inventory
customers are:  Accuracy received into the ERP system on the date of
 Not recorded  Cutoff receipt, and the ERP system automatically [Completeness;
 Recorded at the records an adjustment to the inventory Valuation and
incorrect amount subsidiary ledger and to cost of sales in the Allocation;
 Recorded in the general ledger. (Preventative) Existence]
incorrect period.
AND/OR
132
Cost of Sales
Control Activities
All returned goods are logged when received. Inventory

On a periodic basis, return details per the log
are compared to the inventory records to [Completeness;
verify the returned inventory is properly Valuation and
recorded in the inventory sub-ledger, and to Allocation;
verify cost of sales has been reduced in the Existence]
general ledger. (Detective)
Recording Cost Inventory may be Occurrence Management reviews and approves the Inventory
of Sales removed from journal entry and supporting documentation [Completeness]
inventory records and for inventory and cost of goods sold for
recorded as a cost of goods that have been dispatched prior to
sales upon dispatch transfer of ownership. (Preventative)
prior to transfer of
ownership.
Recording Cost Inventory held by a Completeness On a periodic basis, the reports provided by Inventory
of Sales third party that has the third party to the entity, either directly or [Existence; Rights
been sold to a final by confirmation, are reviewed and reconciled and Obligations]
customer has not been to internal records and used by the entity to
reduced from reduce inventory and record cost of sales.
inventory or recorded
as a cost of sales.
Recording Cost Inventory held by a Occurrence On a periodic basis, the reports provided by Inventory
of Sales third party and not yet the third party to the entity, either directly or [Completeness]
sold is improperly by confirmation, are reviewed and reconciled
reduced from to internal records and used by the entity to
inventory and reduce inventory and record cost of sales.
recorded as cost of
sales.
Recording Cost Inventory records Completeness Physical inventory is counted periodically Inventory
of Sales include inventory that and discrepancies are investigated and [Valuation and
is not in a saleable corrected within the inventory records. Allocation]
condition. Inventory records based on the physical
133
Cost of Sales
Control Activities

(Detective)
Recording Cost Intercompany profits  Occurrence Intercompany sales are analysed at period- Inventory
of Sales are:  Accuracy end to calculate the amount of intercompany [Existence;
 Not eliminated profit in inventory to be eliminated. Finance Valuation and
from inventory personnel prepare the journal entry, Allocation]
 Eliminated at the supporting documentation, and account
incorrect amount. analysis for intercompany profit in inventory
to be eliminated. Management reviews and
documentation, and account analysis before
Recording Cost Inventory issued on Occurrence Consigned inventory is confirmed and Inventory
of Sales consignment and not confirmations are reconciled to inventory
yet sold is improperly records and the general ledger. On a periodic [Completeness]
reduced from basis, consigned inventory is physically
inventory and verified by company personnel and
recorded as cost of reconciled to the inventory records.
sales. (Detective)
AND/OR
Inventory consignee provides periodic Inventory
reporting of consigned inventory sold to third
parties, and consigned inventory held. These [Completeness]
reports are reviewed and reconciled to
internal records, and used by the entity to
record cost of sales and relieve inventory.
(Detective)
Recording Cost Inventory held on Completeness Consigned inventory is confirmed and Inventory
consignment and confirmations are reconciled to inventory [Existence]
134
Cost of Sales
Control Activities
of Sales subsequently sold has records and the general ledger. Randomly,
not been invoiced and consigned inventory is physically verified by
recorded as a sale and company personnel. (Detective)
receivable.
AND/OR
Inventory consignee (third party) provides Inventory
periodic reporting of consigned inventory [Existence]
held. These reports are reviewed and
reconciled to internal records and differences
are investigated. (Detective)
Recording Cost Inventory held at Occurrence Physical inventory, including inventory held Inventory
of Sales offsite locations is at offsite locations, is counted periodically
improperly reduced and discrepancies are investigated and [Completeness]
from inventory and corrected within the inventory records.
recorded as cost of Inventory records are reconciled to the
sales. general ledger. (Detective)
Recording Cost Inventory records Completeness Physical inventory is counted periodically Inventory
of Sales include inventory that and discrepancies are investigated and
does not exist due to corrected within the inventory records. [Existence]
shrinkage, which has Inventory records are reconciled to the
not been recorded as a general ledger. (Detective)
component of cost of
sales.
Recording Cost Inventory previously Completeness On a periodic basis, consigned inventory is Inventory
of Sales issued on consignment physically verified by company personnel
that has been sold to a and reconciled to the inventory records. [Existence; Rights
third party has not (Detective) and Obligations]
been relieved from
inventory or recorded AND/OR
135
Cost of Sales
Control Activities
as a cost of sale. On a periodic basis, the inventory consignee Inventory

provides the entity reporting of consigned
inventory sold to third parties and consigned [Existence; Rights
inventory still held, or the entity confirms and Obligations]
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)
136
Depreciation/Amortisation and Other Expenses
Control Activities

Recording Other Other Expenses are:  Occurrence Trade payables and other expenses are
Expenses  Recorded for  Completeness recorded automatically by the ERP
transactions that did  Accuracy system upon matching the purchase
not occur order, completed service order, and the
 Not recorded for invoice received, completing a 3-way
transactions that did match. (Preventative)
occur AND/OR
 Recorded at incorrect
amounts. Manual journal entries to trade
payables, inventory, or Other Expenses,
including period-end payable accruals,
and supporting documentation, are
(Detective)
AND/OR
and prior-year amounts; significant
and/or unusual differences are
investigated and resolved. (Detective)
Recording Other Other Expenses are Cutoff Other Expenses at, or after, period-end
Expenses recorded in the incorrect are reviewed and scrutinised by
accounting period. management for proper accounting in
the proper period prior to recording.
(Preventative)
AND/OR
Management compares monthly
137
Control Activities
financial statements, including financial

metrics, to budget and prior-year
amounts; significant unusual
relationships are monitored,
investigated, and resolved. (Detective)
Recording Other Other Expenses are Classification Manual journal entries are prepared by
Expenses recorded in the incorrect accounting personnel, and
general ledger account. management, who examines the
supporting documentation, makes
certain the journal entry has been
recorded correctly by the preparer.
(Preventative)
AND/OR
Management compares monthly
financial statements, including financial
metrics, to budget and prior year
investigated, and resolved. (Detective)
Recording Other Amounts recorded to trade Occurrence Trade payables and other expenses are Trade payable
Expenses payables and other recorded automatically by the ERP
expenses do not relate to system upon matching the purchase [Existence]
goods or services received. order, completed vendor work order, or
GRN. (Preventative)
AND/OR
Manual journal entries to trade Trade payable

payables, inventory, or other expenses,
including period-end payable accruals, [Existence]
and supporting documentation, are
138
Control Activities

(Preventative)
Recording Other Prepaid expenses are Occurrence Prepaid expenses and related other Prepaid Expenses
Expenses incorrectly removed from the expense accounts are analysed on a
general ledger when a monthly basis and compared to budget. [Completeness]
prepaid asset still exists. Explanations are obtained for any
significant variances and differences. The
analysis is reviewed by senior
AND/OR
Management with knowledge of service Prepaid Expenses
providers’ transaction terms reviews
prepaid expense general ledger activity for [Completeness]
unusual adjusting entries. Discrepancies
basis. (Detective)
Recording Other Prepaid expenses are Accuracy Finance personnel prepare journal Prepaid Expenses
Expenses recorded at the incorrect entries to record prepaid expenses,
amount. including supporting documentation. [Valuation and
Management reviews the journal Allocation]
entries and supporting documentation
to record prepayments prior to
accounting personnel recording to the
general ledger. (Preventative)
AND/OR
Prepaid expenses and related other Prepaid Expenses
monthly basis and compared to budget. [Valuation and
Explanations are obtained for any Allocation]
139
Control Activities

Recording Other Expenditures where future Occurrence Invoices for goods or services received Prepaid Expenses
Expenses benefits exist for the entity are authorised and accompanied by
are incorrectly recorded as appropriate supporting documentation. [Completeness]
expenses instead of Management reviews supporting
prepaid. documentation and journal entries to
record prepayments prior to accounting
personnel recording to the general
ledger. (Preventative)
AND/OR
AND/OR
Finance personnel review the nature Prepaid Expenses

and type of expenses incurred, and
code the expense to the appropriate [Completeness]
account. Management reviews the
coding, supporting documentation, and
journal entry before the journal entry is
Recording Other Expenditures where no Completeness Finance personnel prepare journal Prepaid Expenses
Expenses future benefit exists to the entries to record prepaid expenses,
entity are recorded as including supporting documentation. [Existence]
Management reviews the journal
140
Control Activities
prepaid expenses and entries and supporting documentation

deferred on the balance to record prepaid expenses prior to
sheet. accounting personnel recording to the
general ledger. (Preventative)
AND/OR

monthly basis and compared to budget. [Existence]
Recording Other Amortisation of prepaid is Completeness Finance personnel prepare amortisation Prepaid Expenses
Expenses recorded in advance of the schedules for all recorded prepaid [Completeness]
time period associated with expenses, including preparing
the prepaid expense. supporting documentation for the
amortisation period and methodology.
Management reviews and approves
amortisation schedules and supporting
documentation before recording
amortisation journal entries.
(Preventative)
AND/OR
Management with knowledge of Prepaid Expenses
service providers’ transaction terms [Completeness]
reviews recorded prepaid expenses for
proper recording, classification, and
amortisation, including review of
supporting documentation and
analyses. Discrepancies are
141
Control Activities

basis. (Detective)
Recording Other Amortisation recorded Occurrence Finance personnel prepare amortisation Prepaid Expenses
Expenses does not include all prepaid schedules for all recorded prepaid [Existence; Rights
items. expenses, including preparing and Obligations]
supporting documentation for the
amortisation schedules for
completeness and accuracy and
supporting documentation before
(Preventative)
Recording Other Amortisation recorded Completeness Finance personnel prepare amortisation Prepaid Expenses
Expenses includes prepaid items that schedules for all recorded prepaid [Completeness;
do not exist. expenses, including preparing Rights and
supporting documentation for the Obligations]
amortisation schedules for
completeness and accuracy and
supporting documentation before
(Preventative)
Recording Other Period assigned or Accuracy Finance personnel prepare amortisation Prepaid Expenses
Expenses amortisation methodology schedules for all recorded prepaid [Valuation and
applied is inappropriate. expenses, including preparing Allocation]
supporting documentation for the
amortisation schedules and supporting
142
Control Activities
documentation before recording

amortisation journal entries.
(Preventative)
Recording Other Inappropriate methodology Accuracy Management reviews the provision for Trade receivables
Expenses for calculating the doubtful trade receivables [Valuation and
provision for doubtful methodology, assumptions, and Allocation]
trade receivables could underlying calculation for
result in misstated trade appropriateness on a periodic basis.
receivables and bad debt (Detective)
expense.
Recording Other Provision for doubtful Accuracy The ERP system ages the trade Trade receivable
Expenses trade receivables receivables based on the parameters [Valuation and
calculation is based on established within the ERP system and Allocation]
inaccurate receivables this computer-generated information is
aging data. used in the calculation of the Provision
for doubtful trade receivables.
(Preventative)
Recording Other Improvements made to Occurrence Improvement project plans are Fixed assets
Expenses fixed assets (e.g., reviewed by finance personnel with [Completeness]
remodels, additions) are knowledge of the entity’s capitalisation
incorrectly expensed. policy. The journal entry and
supporting documentation for capital
improvement expenditures are
(Preventative)
AND/OR
Recorded Other Expenses are Fixed assets
compared to budget regularly; [Completeness]
management investigates and resolves
143
Control Activities
significant variances. (Detective)

Recording Other Expenditures of a non- Completeness Expenditures of a non-capital nature Fixed assets
Expenses capital nature (e.g., repairs are reviewed and approved by finance [Existence]
and maintenance) have personnel with knowledge of the
been incorrectly entity’s capitalisation policy. Journal
capitalised. entry and supporting documentation for
(Preventative)
AND/OR
Recorded capital expenditures and Fixed assets

other expenses are compared to budget
regularly; management investigates and [Existence]
resolves significant variances.
(Detective)
Recording Other Depreciation expense is:  Accuracy Management reviews fixed assets Fixed assets
Expenses  Calculated using an  Occurrence additions for appropriate assignment of [Valuation and
inappropriate rate or depreciable lives and methodology, and Allocation;
using an inappropriate performs a periodic review of useful Existence]
methodology lives and depreciation methodology for
 Recorded at the all fixed assets for ongoing
incorrect amount appropriateness. (Preventative)
 Not calculated for all AND/OR
fixed assets.
On a periodic basis, management Fixed assets
performs a retrospective analysis of [Valuation and
fixed assets disposals to challenge the Allocation
depreciable lives and methodology Existence]
being applied to fixed assets.
(Detective)
144
Control Activities
Recording Other Depreciation expense is Occurrence Expenditures of a non-capital nature Fixed assets
Expenses recorded for assets of a are reviewed and approved by finance [Completeness]
non-capital nature or for personnel with knowledge of the
assets that have been entity’s capitalisation policy. Journal Cost of Sales
disposed. entry and supporting documentation for [Occurrence]
reviewed by management prior to the Other Expenses
journal entry being posted. [Occurrence]
(Preventative)
AND/OR
Management reviews fixed assets Fixed assets
additions for appropriate assignment of [Completeness]
useful lives and methodology, and
performs a periodic review of useful Cost of Sales
lives and depreciation methodology for [Occurrence]
all fixed assets for ongoing
appropriateness. (Detective) Other Expenses
[Occurrence]
AND/OR
On a periodic basis, management Fixed assets
performs a retrospective analysis of [Completeness]
fixed assets disposals to challenge the
depreciable lives and methodology Cost of Sales
being applied to fixed assets. [Occurrence]
(Detective)
Other Expenses
[Occurrence]
Recording Other Intangibles where no future Completeness Finance personnel periodically Intangible Assets
Expenses economic benefit is reconcile intangible asset balances to
expected are recorded or supporting documentation;
145
Control Activities
are recorded in excess of management reviews and approves the [Existence;

the asset amount rather reconciliations, including supporting Valuation and
than as an other expense. documentation for account activity. Allocation]
Unusual activity or invalid reconciling
items are investigated and resolved on a
AND/OR
Finance personnel maintain a listing of Intangible Assets

recorded intangible assets. The listing
is reviewed by operational [Existence;
management, including in-house legal Valuation and
counsel, as appropriate, for Allocation]
completeness. Discrepancies are
basis and adjusted to other expense.
(Detective)
Recording Other Impairment indicators may Completeness On a periodic basis, accounting and Fixed assets
Expenses exist for recorded fixed operations management meet to assess [Valuation and
assets, but are not known internal or external factors that may be Allocation]
to or identified by indicators of impairment.
management. (Preventative)
AND/OR
Management periodically reviews Fixed assets
budgeted versus actual results for the [Valuation and
entity, including its product lines and Allocation]
segments. The results of this review are
utilised by management in assessing
whether impairment indicators may be
146
Control Activities
present. (Detective)
Recording Other Management’s impairment Accuracy Finance management reviews the Intangible Assets
Expenses assessment uses business business assumptions (including the [Valuation and
and valuation assumptions reporting unit carrying amounts and Allocation]
that are not based on its assessment date) for appropriateness
best and most supportable prior to being provided to
estimates. management’s valuation expert.
(Preventative)
AND/OR
Management from different areas of the Intangible Assets
entity meet to review the forecast for [Valuation and
appropriateness using historical Allocation]
performance, their knowledge of the
entity’s strategic plans, industry
projections, and peer company data.
(Preventative)
AND/OR
Management reviews the calculations Intangible Assets
performed and assumptions used within [Valuation and
the goodwill impairment assessment for Allocation]
consistency with commonly accepted
valuation practices, prior-year
assumptions, and publicly available
peer company and industry
information. (Preventative)
Recording Other Amortisation is not Completeness Management reviews intangible asset Intangible Assets
Expenses calculated for all recorded additions for appropriate assignment of [Existence]
intangible assets. useful lives and methodology, and
performs a periodic review of useful
lives and amortisation methodology for
all intangible assets for ongoing
147
Control Activities
appropriateness. (Detective)
Recording Other Amortisation is recorded Occurrence Finance personnel periodically Intangible Assets
Expenses for intangible assets that reconcile intangible asset balances, and [Completeness;
have been disposed, fully related amortisation, to supporting Rights and
amortised, or for which the documentation; management reviews Obligations]
entity does not have legal and approves the reconciliations,
ownership. including supporting documentation for
account activity. Unusual transactions
basis and adjusted to other expense.
(Detective)
Recording Other Intangible assets are Accuracy On a periodic basis, finance personnel Intangible Assets
Expenses amortised using an analyse intangible assets for the best [Valuation and
inappropriate useful life or estimate of useful lives, and an Allocation]
method that is amortisation method that reflects the
inappropriate under the pattern in which economic benefits of
circumstances. the intangible asset are consumed or
otherwise used up. Management
reviews and approves the analysis and
(Preventative)
AND/OR
On a periodic basis, management Intangible Assets
performs a retrospective analysis of [Valuation and
intangible assets that have been fully Allocation]
amortised in prior periods to challenge
the useful lives and methodology being
applied to intangible assets. (Detective)
148
Control Activities
Recording Other Goods received by, or  Completeness Trade payables and other expenses are Trade payable
Expenses services rendered to, the  Accuracy recorded automatically by the ERP
entity are: system upon matching the purchase [Completeness;
order, completed vendor work order, or Valuation and
 Not recorded in trade GRN. (Preventative) Allocation]
payables or Other
Expenses AND/OR
 Recorded at the
incorrect amount. On a periodic basis, finance personnel Trade payable
Other Expenses and accrued payables [Completeness;
for goods or services rendered for Valuation and
which a completed service order or Allocation]
vendor invoice has not been received.
The journal entry and supporting
documentation are reviewed and
(Preventative)
AND/OR
On a periodic basis, management Trade payable

and prior-year amounts; significant [Completeness;
and/or unusual differences are Valuation and
investigated and resolved. (Detective) Allocation]
Recording Other Accruals and other Occurrence Finance personnel prepare the journal Provision for
Expenses expenses are initially entry, supporting documentation, and expenses
recorded when no liability account analysis to record provision for
exists. expenses. Management reviews and [Existence; Rights
149
Control Activities
documentation, and account analysis and Obligations]

(Preventative)
AND/OR
On a periodic basis, finance personnel Provision for
reconcile provision for expenses to expenses
supporting detail. Management reviews
the reconciliation and supporting [Existence; Rights
documentation, and unusual activity or and Obligations]
invalid reconciling items are
basis. (Detective)
Recording Other Provision for expenses Completeness On a periodic basis, finance personnel Provision for
Expenses exist but are not recorded. meet with members of management expenses
(e.g., sales, operational, human
resources, legal counsel) to discuss [Completeness]
developments and/or changes in the
business that may affect recorded
provision for expenses, or may affect
the need to record an provision for
Recording Other The entity uses an Accuracy On a periodic basis, provision for Provision for
Expenses inappropriate methodology expenses are recorded based on an expenses
or incorrect significant analysis performed by qualified [Valuation and
assumptions or underlying personnel at the entity or by a qualified Allocation]
data to calculate and record third-party specialist. The
provision for expenses. methodology, significant assumptions,
and underlying data used, as well as the
150
Control Activities
journal entry, are reviewed, evaluated,

and approved by management with
appropriate knowledge before the
(Preventative)
AND/OR
On a periodic basis, management Provision for
retrospectively reviews prior-year expenses
provision for expenses; including the
methodology used, significant [Valuation and
assumptions utilised, and the Allocation]
underlying data relied upon in
developing such estimates. Revisions
are made to the methodology or
significant assumptions and underlying
data used in the current-period
estimation process, as necessary.
(Detective)
Recording Other Costs are incorrectly Accuracy; Finance personnel review the nature Cost of Sales
Expenses classified (e.g., costs of an Classification and type of costs incurred, and code the
other expense nature are cost to the appropriate account. [Accuracy;
incorrectly classified as Management reviews the coding, Classification]
inventory costs, costs of an supporting documentation, and journal
inventory nature are entry before the journal entry is
incorrectly classified as an recorded. (Preventative)
other expense). AND/OR
Management periodically reviews Cost of Sales
actual inventory, cost of sales, gross
profit, and other expense amounts in [Accuracy;
comparison to budget, historical Classification]
amounts, or current-year trends, and
151
Control Activities

and disaggregation (e.g., by type of
product line, type of services).
(Detective)
Recording Other Operating leases for fixed Completeness New lease contracts and lease Long-term/short-
Expenses assets are incorrectly modifications are reviewed by finance term borrowings
leases. meet the criteria for finance or
operating lease treatment, including Fixed assets
reference to the appropriate accounting [Existence]
framework and principle. The journal
entry and supporting documentation are
(Preventative)
AND/OR

management to verify that the lease has [Existence]
been properly accounted for as a
finance or operating lease. (Detective) Fixed assets
[Existence]
Recording Other Finance leases for fixed Occurrence New lease contracts and lease Long-term/short-
Expenses assets are incorrectly modifications are reviewed by finance term borrowings
accounted for as operating personnel to determine whether they
leases. meet the criteria for finance or [Completeness]
152
Control Activities

reference to the appropriate accounting Fixed assets
framework and principle. The journal
entry and supporting documentation are [Completeness]
(Preventative)
AND/OR
management to verify that the lease has [Completeness]
been properly accounted for as a
finance or operating lease. (Detective)
Fixed assets
[Completeness]
Recording Other Provision for doubtful Accuracy Management reviews the Provision for Trade receivables
Expenses trade receivables is doubtful trade receivables [Valuation and
insufficient in reserving for methodology, assumptions, and Allocation]
both unknown but underlying calculation for
historically predictable bad appropriateness on a periodic basis.
debt and specific known (Detective)
bad debt.
Recording Other Management does not Accuracy Management reviews the assumptions Trade receivables
Expenses appropriately consider utilised in calculating the provision to [Valuation and
economic, industry, or assess and conclude whether the Allocation]
customer financial assumptions take into consideration the
considerations in the current economic environment, specific
calculation of Provision for customer financial conditions,
153
Control Activities
doubtful trade receivables. regulatory changes, industry issues, etc.

Based on their review, management
approves the Provision for doubtful
trade receivables. (Preventative)
Recording Other Provision for doubtful Accuracy Credit manager reviews aged trade Trade receivables
Expenses trade receivables is receivables and documentation of [Valuation and
overstated due to possible collection activities performed by the Allocation]
management bias credit personnel supporting the specific
concerning specific reserve and approves the recorded
customer reserves. specific reserves. (Preventative)
Recording Other Receivables write-offs Accuracy Trade receivables write-offs are Trade receivables
Expenses using the direct write-off performed by accounting personnel in [Valuation and
method are not authorised accordance with the write-off policy. Allocation]
in accordance with the Management reviews trade receivables
established policy and, as a write-offs for compliance with the
result, may be invalid. established policy. (Detective)
Recoveries of Customer-specific reserves Accuracy Management responsible for Trade receivables

Other Expenses do not take into developing the provision for doubtful [Valuation and
consideration information trade receivables obtains and reviews Allocation]
regarding pending losses or credit department documentation
recoveries. regarding collection efforts on aged
receivables for information indicating a
pending loss or recovery.
(Preventative)
Recording Other Trade receivable are Occurrence Management reviews and approves Trade receivables
Expenses incorrectly written off. write-offs of trade receivables. [Completeness;
(Detective) Rights and
Obligations]
Recording Other Recoveries of trade Classification Management reviews recoveries of Trade receivables
Expenses receivables previously trade receivables previously written off. [Classification]
written off are improperly Journal entries made to record trade
recorded in the Statement receivables recoveries are reviewed and
154
Control Activities
of Profit and Loss. approved by management prior to

recording. (Detective)
Recording Other Capital work-in-progress Completeness; Operations management periodically Fixed assets
Expenses (CWIP) is not transferred Accuracy; reviews the listing of CWIP assets and [Valuation and
to fixed assets when the Classification communicates to accounting Allocation]
asset is placed into service management any CWIP assets that
and therefore not have been put into service. (Detective)
depreciated.
Recording Other Internally developed Occurrence Finance personnel with the requisite Intangible Assets
Expenses intangible assets (e.g., expertise and knowledge of the
copyrights, trademarks, applicable accounting framework, [Completeness;
patents) are inappropriately review costs incurred related to Valuation and
recorded as expenses. intangible assets. Supporting Allocation]
documentation and the journal entry are
prepared by finance personnel, and
(Preventative)
Recording Other The entity inappropriately Completeness Finance personnel with the requisite Goodwill and
Expenses capitalises costs related to expertise and knowledge of the Intangible Assets
internally developed applicable accounting framework,
intangible assets rather review costs incurred related to [Existence]
than expense such costs. intangible assets. Supporting
documentation and the journal entry are
prepared by finance personnel and
(Preventative)
AND/OR
155
Control Activities
Finance personnel periodically Goodwill and

reconcile intangible asset balances to Intangible Assets
Management reviews and approves the [Existence]
reconciliations, including supporting
documentation for account activity.
Unusual activity or invalid reconciling
items are investigated and resolved on a
Recording Other Provision for payroll, Accuracy Finance personnel prepare the journal Provision for
Expenses taxes, and other costs are entry, supporting documentation, and expenses
recorded at incorrect account analysis to record provision for
amounts. expenses. Management reviews and [Valuation and
approves the journal entry, supporting Allocation]
before the journal entry is recorded. Cost of Sales
(Preventative)
[Accuracy]
AND/OR
Management periodically reviews Provision for
actual inventory, cost of sales, gross expenses
profit, and other expense amounts in [Valuation and
comparison to budget, historical Allocation]
amounts, or current-year trends, and Cost of Sales
significant variances. This review is [Accuracy]
and disaggregation (e.g., by type of
product line, type of services).
156
Control Activities
(Detective)
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)
Recording Other Provision for bonuses are Accuracy Finance personnel calculate accrued Provision for
Expenses incorrectly calculated and bonuses based on the provisions of the expenses
recorded due to bonus program. Management reviews
misapplication of the and approves the bonus calculation and [Valuation and
bonus criteria. journal entry before the journal entry is Allocation]
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
AND/OR
compares actual results with budgeted expenses
and/or unusual differences are [Valuation and
Recording Other Compensated absences are Accuracy On a periodic basis, finance personnel Provision for
Expenses incorrectly calculated and calculate compensated absence and expenses
recorded (i.e., not prepare the supporting documentation
consistent with the stated and related journal entry. Management,
157
Control Activities
human resource policy). including human resource management, [Valuation and

reviews the calculation and journal Allocation]
entry for consistency with the stated
policy and approves the journal entry
before it is recorded. (Preventative)
AND/OR
compares actual results with budgeted expenses
and/or unusual differences are [Valuation and
158
Finance Cost
Finance Cost

Transaction Misstatement (“What performed by IOTAEC
Type Could Go Wrong”) Assertion(s) Example Control(s) Other Affected Account(s)

Recording Finance cost is recorded Occurrence Finance personnel prepare the
Finance Cost but does not exist. journal entry, supporting
documentation, and account
analysis to record finance cost.
approves the journal entry,
supporting documentation, and
account analysis before the
(Preventative)
AND/OR
personnel reconcile accrued
interest to supporting detail.
Management reviews the
reconciliation and supporting
documentation, and unusual
activity or invalid reconciling
items are investigated and
resolved on a timely basis.
(Detective)
Recording Finance Cost exists but Completeness On a periodic basis, finance
Finance Cost is not recorded. 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 finance cost, or may
affect the need to record
159
Finance Cost

additional finance cost.

Finance personnel prepare a
documentation, which are
reviewed by management
Recording Finance Cost is Accuracy Finance personnel prepare the
Finance Cost recorded at incorrect journal entry, supporting
amounts. documentation, and account
analysis to record accrued
finance cost. Management
reviews and approves the
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)
Recording Finance Costs are Cutoff Finance Costs at, or after,
Finance Cost recorded in the period-end are reviewed and
incorrect accounting scrutinised by management for
period. proper accounting in the
proper period prior to
160
Finance Cost

recording. (Preventative)
AND/OR
Management compares
monthly financial statements,
including financial metrics, to
budget and prior-year
investigated, and resolved.
(Detective)
Recording Finance Costs are Classification Manual journal entries are
Finance Cost recorded in the prepared by accounting
incorrect general ledger personnel, and management,
account. who examines the supporting
documentation, makes certain
the journal entry has been
recorded correctly by the
preparer. (Preventative)
AND/OR
Management compares
monthly financial statements,
including financial metrics, to
budget and prior-year
investigated, and resolved.
(Detective)
Recording Capitalised interest is:  Occurrence CWIP is reviewed by finance Fixed assets [Existence;
Finance Cost  Inappropriately  Completeness personnel with knowledge of Completeness; Valuation
recorded for assets  Accuracy the entity’s capitalisation and Allocation]
directly purchased
161
Finance Cost

and put into service policy. Finance personnel

 Not recorded for consider whether the assets
assets constructed constructed qualify for
 Recorded at the capitalised interest based on
incorrect amount.
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)
162
Journal Entries
Journal Entries
Control Activities
Type Could Go Wrong”) Assertion(s) Example Control(s) Account(s IOTAEC
Capturing and There is a mismatch  Balance Sheet:

processing routine between sub- ledger and Existence,
information General Ledger Completeness,
Rights and
Obligations,
Valuation and
Allocation Sub-ledgers are reconciled to the
 Statement of general ledger on a regular basis. All
Profit and Loss: reconciling items are identified,
Occurrence, investigated, and cleared on a timely
Completeness, basis. Management reviews
Accuracy Cut- reconciliations and follows up on
off,
unusual matters on a timely basis.
Classification
 Cash Flow (Detective)
Statement:
Completeness,
Cut-off,
Classification
and Understand-
ability, Accuracy
and Valuation
Capturing and The appropriate accounting  Balance Sheet: Accounting treatment for significant
processing non- treatment is not specified Existence, non-routine events and transactions
routine for each non-routine event, Completeness, (including those requiring the use of
information transaction, and account Rights and accounting estimates and judgment in
balance. Obligations, the selection and application of
Valuation and accounting principles) is researched,
Allocation analysed, documented, updated, and
 Statement of communicated to responsible parties on
Profit and Loss:
163
Journal Entries
Control Activities
Occurrence,
Completeness,
Accuracy Cut-
off,
a regular basis. Such communication
Classification
Cash Flow also includes the timeframes and
Statement: appropriate methods for computing
Completeness, estimates and the framework for
Cut-off, judgments involved.
Classification
and Understand-
ability, Accuracy
and Valuation
Capturing and There is no evaluation of  Balance Sheet: Accounting policies and procedures
processing non- each non-routine event or Existence, specify correct treatment for major
routine transaction. Completeness, types of non-routine events and
information Rights and transactions. Proper application to
Obligations, facts and circumstances is monitored
Valuation and independently across business units and
Allocation across accounting periods.
 Statement of
Profit and Loss:
Occurrence,
Completeness,
Accuracy Cut-
off,
Classification
 Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and Understand-
164
Journal Entries
Control Activities
ability, Accuracy
and Valuation
Capturing and There is no relevant,  Balance Sheet:
processing non- sufficient, and reliable data Existence,
routine to record, process, and Completeness,
Rights and Data and other information used in
information report each non-routine
Obligations, preparing the analysis for each non-
event.
Valuation and routine event or transaction are
Allocation relevant. Appropriate controls or
 Statement of procedures are in place and operating
Profit and Loss: effectively to ensure the validity,
Occurrence, accuracy, and completeness of the data
Completeness, and other information used in preparing
Accuracy Cut- the analysis. This includes controls
off, over any process used to extract,
Classification summarise, and accumulate data and
 Cash Flow information that is obtained directly
Statement:
from the general ledger (e.g., the data is
Completeness,
reconciled to the underlying supporting
Cut-off,
Classification documentation).
and Understand-
ability, Accuracy
and Valuation
Capturing and Application of the entity's  Balance Sheet: Accounting policies and procedures
processing non- accounting policies to each Existence, specify correct treatment for major
routine non-routine event or Completeness, types of non-routine events and
information transaction is not Rights and transactions. Proper application to
performed on a timely Obligations, facts and circumstances is monitored
basis and appropriately Valuation and independently across business units and
documented. Allocation across accounting periods.
 Statement of
Profit and Loss:
165
Journal Entries
Control Activities
Occurrence,
Completeness,
Accuracy Cut-
off,
Classification
 Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and Understand-
ability, Accuracy
and Valuation
Capturing and Application of the entity's  Balance Sheet: For each non-routine event or
processing non- accounting policies to each Existence, transaction, a supporting analysis is
routine non-routine event or Completeness, prepared and documented by
information transaction is not Rights and knowledgeable personnel in accordance
performed on a timely Obligations, with relevant generally accepted
basis and appropriately Valuation and accounting principles (including
documented. Allocation relevant regulatory rules) and the
 Statement of entity's accounting policies. An entity-
Profit and Loss:
specific checklist of the entity's policies
Occurrence,
Completeness, and procedures, a generally accepted
Accuracy Cut- accounting principles checklist, or
off, other suitable mechanism is used to
Classification ensure each non-routine event or
 Cash Flow transaction is valid, complete, and
Statement: appropriately recorded in the
Completeness, appropriate accounting period.
Cut-off,
Classification
and Understand-
166
Journal Entries
Control Activities
ability, Accuracy
and Valuation
Capturing and There is no independent  Balance Sheet:
processing non- review of application of the Existence,
routine entity's accounting policies Completeness,
information to each non-routine event Rights and
or transaction for Obligations, Management reviews details of
appropriateness and Valuation and significant non-routine events and
absence of bias by an Allocation transactions for completeness and
individual with the  Statement of validity on a regular basis. Information
Profit and Loss:
appropriate level of about each significant non-routine
Occurrence,
authority and experience. Completeness, event and transaction is analysed and
Accuracy Cut- documented in a timely manner.
off, Management reviews all
Classification documentation and analysis supporting
 Cash Flow significant non-routine transactions
Statement: prior to recording amounts in the
Completeness, general ledger.
Cut-off,
Classification
and Understand-
ability, Accuracy
and Valuation
Capturing and Application of the entity's  Balance Sheet: An independent review of significant
processing non- accounting policies to each Existence, judgments and estimates included in
routine non-routine event or Completeness, the financial records is performed at the
information transaction is not Rights and end of every accounting period by
performed on a timely Obligations, knowledgeable personnel. The
basis and appropriately Valuation and independent review includes a
documented. Allocation comparison with subsequent outcomes
 Statement of and an evaluation to determine degree
Profit and Loss:
167
Journal Entries
Control Activities
Occurrence,
Completeness,
Accuracy Cut-
off,
Classification
 Cash Flow of accuracy, fairness of information,
Statement: and evidence of bias.
Completeness,
Cut-off,
Classification
and Understand-
ability, Accuracy
and Valuation
Capturing and Journal entries for non-  Balance Sheet: Journal entries have adequate
processing non- routine event or transaction Existence, supporting documentation and are
routine are not approved by Completeness, reviewed and approved independently
information management. Rights and prior to posting.
Obligations,
Valuation and
Allocation
 Statement of
Profit and Loss:
Occurrence,
Completeness,
Accuracy Cut-
off,
Classification
 Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and Understand-
168
Journal Entries
Control Activities
ability, Accuracy
and Valuation
Capturing and There are no appropriate  Balance Sheet:
processing non- basis for non-routine Existence,
routine transactions involving Completeness,
information significant estimates and Rights and
judgements Obligations,
Valuation and
Allocation
 Statement of
Profit and Loss:
Occurrence, Significant estimates and judgments
Completeness, and changes thereto are reported to the
Accuracy Cut- audit committee on a regular basis.
off,
Classification
 Cash Flow
Statement:
Completeness,
Cut-off,
Classification
and Understand-
ability, Accuracy
and Valuation
Capturing and There are no appropriate  Balance Sheet: An independent review of significant
processing non- basis for non-routine Existence, judgments and estimates included in
routine transactions involving Completeness, the financial records is performed at the
information significant estimates and Rights and end of every accounting period by
judgements Obligations, knowledgeable personnel. The
Valuation and independent review includes a
Allocation comparison with subsequent outcomes
 Statement of and an evaluation to determine degree
Profit and Loss:
169
Journal Entries
Control Activities
Occurrence,
Completeness,
Accuracy Cut-
off,
Classification
 Cash Flow of accuracy, fairness of information,
Statement: and evidence of bias.
Completeness,
Cut-off,
Classification
and Understand-
ability, Accuracy
and Valuation
170
Financial Reporting
Financial Reporting
Control Activities
Transaction Type Could Go Wrong”) Assertion(s) Example Control(s) Account(s IOTAEC
Defining the There is no appropriate  Completeness Management establishes a well-defined

Financial Closing documented process with  Occurrence and process for financial reporting based on
and Reporting respect to financial closing rights and the specific characteristics of the entity.
Process and reporting, including the obligations The process and its overall timing,
identification and updating  Classification and methodology, format and frequency of
of internal and external understandability analysis are formally documented,
financial reporting  Accuracy and approved, and reviewed on a regular
requirements and deadlines. valuation basis. (Preventative)
Defining the There is no appropriate  Completeness Corporate accounting policies and
Financial Closing documented process with  Occurrence and procedures, standard charts of accounts
and Reporting respect to financial closing rights and and related guidance are appropriately
Process and reporting, including the obligations created and updated on a regular basis
identification and updating  Classification and and distributed to subsidiaries.
of internal and external understandability
 Accuracy and Knowledgeable personnel monitor
financial reporting
valuation changes in authoritative guidance and
requirements and deadlines.
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,
171
Financial Reporting
Control Activities
Income Tax Act etc.) which are properly

documented and communicated to
achieve consistency across business
units and accounting periods.
(Preventative)
Defining the There are no procedures  Completeness Processes and policies are established
Financial Closing and timetables for  Occurrence and and documented regarding the
and Reporting communicating relevant rights and requirements for entity personnel to
Process information affecting the obligations timely communicate to the financial
financial closing and  Classification and reporting department, information
reporting process within the understandability related to events and transactions
entity and these are not  Accuracy and affecting financial reporting, including
sufficiently documented, valuation significant contracts and agreements.
and updated on a timely The compliance with communication
basis. processes and policies is monitored on a
regular basis.
(Preventative)
Defining the Changes made to the  Completeness Changes to the entity's financial closing
Financial Closing financial closing and  Occurrence and and reporting process (e.g., changes to
and Reporting reporting process are not rights and the chart of accounts, including addition
Process valid and properly obligations and deletion of general ledger accounts)
authorised.  Classification and are monitored; any significant change is
understandability independently reviewed and approved.
 Accuracy and
valuation (Detective)
Defining the Roles and responsibilities in  Completeness Management defines, documents,

Financial Closing the financial closing and  Occurrence and communicates and periodically reviews
and Reporting reporting process are not rights and roles and responsibilities in the financial
Process clearly defined, obligations closing and reporting process in order to
documented, updated, and  Classification and have adequate personnel with the
not communicated to understandability appropriate skills and experience
172
Financial Reporting
Control Activities
appropriate departments  Accuracy and

and individuals on a timely valuation managing all accounting aspects.
basis.
Individuals in financial
reporting roles do not have Knowledgeable personnel are hired into
the necessary understanding financial reporting roles and provided
of the organisation’s with adequate training, in line with
operations and appropriate Corporate guidelines.
accounting knowledge to
properly perform their (Preventative)
assigned responsibilities.
Defining the When alternative  Completeness Evaluations of alternative accounting

Financial Closing accounting treatments are  Occurrence and treatments for significant events and
and Reporting available for a significant rights and transactions are documented and
Process event or transaction, the obligations approved by management. Alternative
decisions on which  Classification and accounting treatments selected
treatments to select are not understandability (including those related to critical
documented, approved by  Accuracy and accounting policies) for significant
management, and are not valuation events and transactions are
communicated to the audit communicated to the Audit Committee
committee. on a timely basis in accordance with
applicable laws and regulations.
(Detective)
Defining the General policies are not  Completeness All overrides require proper
Financial Closing established and documented  Occurrence and authorisation and are documented for
and Reporting regarding permissible rights and subsequent independent review and
Process overrides of existing obligations monitoring.
policies and procedures for  Classification and
173
Financial Reporting
Control Activities
the financial closing and understandability

reporting process.  Accuracy and (Detective)
valuation
Defining the User profiles (on G/L  Completeness
Financial Closing system) are not  Occurrence and System-access profiles are set up by
and Reporting monitored/maintained to rights and management. A form establishing the
Process ensure that appropriate obligations specific access to be granted is
individuals have access to  Classification and completed by the manager.
financial reporting process. understandability
(Preventative)
 Accuracy and
valuation
Capturing and The appropriate accounting  Completeness
processing NON treatment is not specified  Occurrence and Accounting policies and procedures
routine for each non-routine event, rights and specify correct treatment for major types
information transaction, and account obligations of non-routine events and transactions.
balance, including those  Classification and Proper application to facts and
requiring the use of understandability circumstances is monitored
accounting estimates and  Accuracy and independently across business units and
judgment in the selection valuation across accounting periods.
and application of (Detective)
accounting principles.
Capturing and Relevant, sufficient, and  Completeness Data and other information used in
processing NON reliable data necessary to  Occurrence and preparing the analysis for each non-
routine record, process, and report rights and routine event or transaction are relevant.
information each non-routine event or obligations Appropriate controls or procedures are
transaction is not captured.  Classification and in place and operating effectively to
understandability ensure the validity, accuracy, and
 Accuracy and completeness of the data and other
valuation information used in preparing the
analysis. This includes controls over any
process used to extract, summarise, and
174
Financial Reporting
Control Activities
accumulate data and information that is

obtained directly from the general ledger
(e.g., the data is reconciled to the
underlying supporting documentation).
(Preventative)
Capturing and There are no procedures to  Completeness When using computerised systems, the
processing NON ensure all postings have  Occurrence and access rights to open and close financial
routine occurred in the correct rights and periods is adequately restricted to
information period. obligations prevent late entries from posting without
 Classification and appropriate management review after
understandability the books are closed.
 Accuracy and
valuation (Preventative)
Capturing and Significant estimates and  Completeness Formulas used for accruals, write-offs
processing NON judgments are not well  Occurrence and and reserves are periodically reviewed
routine determined and have rights and by the appropriate responsible and
information sufficient supporting obligations consistently followed. Appropriate
documentation.  Classification and management approves changes to
understandability formulas.
 Accuracy and
Capturing and The application of the  Completeness For each non-routine event or
processing NON entity's accounting policies  Occurrence and transaction, a supporting analysis is
routine to each non-routine event or rights and prepared and documented by
information transaction is not performed obligations knowledgeable personnel in accordance
on a timely basis and  Classification and with relevant generally accepted
appropriately documented understandability accounting principles (including relevant
by knowledgeable and  Accuracy and regulatory rules) and the entity's
qualified personnel using valuation accounting policies. An entity-specific
175
Financial Reporting
Control Activities
approved methods and checklist of the entity's policies and

formats. procedures, a generally accepted
accounting principles checklist, or other
suitable mechanism is used to ensure
each non-routine event or transaction is
valid, complete, and appropriately
recorded in the appropriate accounting
period.
(Detective)
Capturing and There is no independent  Completeness Management reviews details of

processing NON review of application of the  Occurrence and significant non-routine events and
routine entity's accounting policies rights and transactions for completeness and
information to each non-routine event or obligations validity on a regular basis. Information
transaction for  Classification and about each significant non-routine event
appropriateness and understandability and transaction is analysed and
absence of bias by an  Accuracy and documented in a timely manner.
individual with the valuation Management reviews all documentation
appropriate level of  Validity, and analysis supporting significant non-
authority and experience. Recording, routine transactions prior to recording
Cutoff
amounts in the general ledger.
(Detective)
All non-routine events and
transactions are not
accurately processed in the
appropriate accounting
period.
176
Financial Reporting
Control Activities
Non-routine events and

transactions are not valid
and properly recorded in the
appropriate accounting
period.
Performing the There is no independent  Completeness An independent review of significant

Accounting Period review of application of the  Occurrence and judgments and estimates included in the
Close entity's accounting policies rights and financial records is performed at the end
to each non-routine event or obligations of every accounting period by
transaction for  Classification and knowledgeable personnel. The
appropriateness and understandability independent review includes a
absence of bias by an  Accuracy and comparison with subsequent outcomes
individual with the valuation
and an evaluation to determine degree of
appropriate level of accuracy, fairness of information, and
authority and experience. evidence of bias.
There is no basis for Significant estimates and judgments and

significant estimates and changes thereto are reported to the audit
judgments associated with committee on a regular basis.
each non-routine event or
transaction. (Detective)
Performing the No analysis is prepared  Completeness Required analysis (including the format,
Accounting Period accurately and consistently  Occurrence and timeline, preparers, and reviewers) are
Close in accordance with the rights and prepared, updated, and distributed on a
entity's defined financial obligations regular basis. Management has
closing process and in the  Classification and processes in place at the end of the
appropriate accounting understandability accounting period to ensure that all
period.  Accuracy and analysis are appropriately performed and
valuation
177
Financial Reporting
Control Activities
independently reviewed.
(Detective)
Performing the All sources of information  Completeness Routine and non-routine events and
Accounting Period for routine and non-routine  Occurrence and transactions occurring near the period-
Close events and transactions are rights and end are analysed and reviewed to
not identified and analysed. obligations determine whether they are accounted
 Classification and for in the appropriate accounting period.
understandability
 Accuracy and (Detective)
valuation
Performing the There are no reconciliations  Completeness
Accounting Period for all significant accounts  Occurrence and
Close and no independent review rights and All significant analysis and
of such reconciliation. obligations reconciliations are independently
 Classification and reviewed in comparison with established
understandability guidelines by knowledgeable personnel.
 Accuracy and All issues identified through the analysis
All required analysis are not
valuation and reconciliations are resolved.
prepared accurately and
consistently in accordance (Detective)
with the entity's defined
financial closing process.
Performing the There are no reconciliations  Completeness Unusual items and exceptions in
Accounting Period for all significant accounts  Occurrence and analysis and reconciliations are
Close and no independent review rights and documented upon identification.
of such reconciliation. obligations Resolution and treatment of unusual
 Classification and items identified are documented and
understandability reviewed independently for
 Accuracy and appropriateness on a timely basis.
All required analysis are not
valuation Management reviews resolution of items
prepared accurately and
178
Financial Reporting
Control Activities
consistently in accordance on a regular basis.

with the entity's defined
financial closing process. (Detective)
Performing the All intercompany  Completeness Knowledgeable personnel prepares and

Accounting Period transactions and balances  Occurrence and updates a list of recurring journal
Close are not identified, rights and entries, including adjusting, self-
reconciled, and obligations reversing, consolidating, and eliminating
appropriately eliminated in  Classification and journal entries, and compare journal
consolidation in the understandability entries proposed during the closing
appropriate accounting  Accuracy and process to such list to determine
period. valuation completeness and validity.
(Preventative)
Performing the All required analysis are not  Completeness Monthly exception and aging reports are
Accounting Period prepared accurately and  Occurrence and generated highlighting unusual items.
Close consistently in accordance rights and Significant items are investigated and
with the entity's defined obligations resolved on a timely basis and in the
financial closing process.  Classification and appropriate accounting period.
understandability
 Accuracy and (Detective)
valuation
Performing the All suspense accounts are  Completeness All suspense accounts are identified and
Accounting Period not identified and  Occurrence and significant accounts / items are reviewed
Close monitored. rights and by management or other supervisory
obligations personnel on a timely basis. Appropriate
 Classification and journal entries to reclassify amounts into
understandability the appropriate general ledger account
 Accuracy and are prepared and reviewed as part of this
valuation process.
179
Financial Reporting
Control Activities
(Detective)
Performing the All suspense accounts are  Completeness The underlying cause for significant
Accounting Period not identified and  Occurrence and suspense items is investigated, assessed,
Close monitored. rights and and appropriately resolved. Appropriate
obligations changes to the financial-reporting
 Classification and process are made to address the
understandability underlying cause for significant
 Accuracy and suspense items.
valuation
(Detective)
Performing the The trial balance(s) used to  Completeness Management has a process in place to
Accounting Period prepare the financial  Occurrence and ensure that the trial balance(s) used in
Close statements are not generated rights and the financial-statement-preparation
from the final general obligations process are final, contain all valid
ledger(s).  Classification and journal entries made, and net to zero.
understandability
 Accuracy and (Preventative)
valuation
Performing the All trial-balance accounts  Completeness
Accounting Period are not appropriately and  Occurrence and A financial statement accounts grouping
Close consistently grouped for rights and schedule is prepared, updated, and used
presentation in the financial obligations in the drafting of the financial
statements for accounting  Classification and statements.
periods presented. understandability
(Preventative)
 Accuracy and
valuation
Performing the All trial-balance accounts  Completeness Financial statement account groupings
Accounting Period are not appropriately and  Occurrence and are independently reviewed for (1)
Close consistently grouped for rights and compliance with presentation in
presentation in the financial obligations conformity with the entity's accounting
statements for accounting  Classification and policies and generally accepted
180
Financial Reporting
Control Activities
periods presented. understandability accounting principles, (2) accuracy and

 Accuracy and consistency, and (3) comparability
valuation between the current and previous
accounting period(s).
(Detective)
Performing the There are no restrictions to  Completeness

Accounting Period access and to run  Occurrence and Only employees involved in the
Close transactions in the rights and reporting package process have access to
automated consolidation obligations such automated applications, with
software which may  Classification and specific user-profiles.
compromise the integrity of understandability
(Preventative)
financial data  Accuracy and
valuation
Performing the All related-party events and  Completeness All related-party events and transactions
Accounting Period transactions are not  Occurrence and are identified and a schedule of such
Close identified and authorised, rights and related-party events and transactions is
appropriately accounted for, obligations prepared. For purposes of financial-
and disclosed in the  Classification and statement presentation and disclosure, an
appropriate accounting understandability independent review of such schedule is
period.  Accuracy and performed by the disclosure committee
valuation (or other suitably qualified personnel)
and the legal department. Any issues
identified are addressed on a timely
basis.
(Detective)
Performing the There are no procedures to  Completeness When using computerised systems, the
Accounting Period ensure all postings have  Occurrence and access rights to open and close financial
Close occurred in the correct rights and periods is adequately restricted to
period. obligations prevent late entries posting without
181
Financial Reporting
Control Activities
 Classification and appropriate management review after

understandability the books are closed.
 Accuracy and
Performing the All related-party events and  Completeness Audit committees must approve all
Accounting Period transactions are not  Occurrence and related-party transactions Board
Close identified and authorised, rights and approval is required for specified types
appropriately accounted for, obligations of related-party transactions and this
and disclosed in the  Classification and approval is appropriately documented.
appropriate accounting understandability
period.  Accuracy and (Detective)
valuation
Performing the All subsidiaries and other  Completeness Management reviews the consolidation
Accounting Period entities are not identified  Occurrence and for the proper inclusion of the results of
Close - and appropriately included rights and all subsidiaries and other entities for
Consolidation & in the consolidation obligations which consolidation is appropriate. A
Reporting process.  Classification and list of subsidiaries and other entities is
understandability prepared, updated for new acquisitions
 Accuracy and and stake disposals. Newly promulgated
valuation 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)
Performing the Consolidation packages  Completeness Internal audit (or other suitably qualified
Accounting Period received from subsidiaries  Occurrence and individuals) on a test basis, verifies the
182
Financial Reporting
Control Activities
Close - do not accurately reflect the rights and accuracy of financial reporting package
Consolidation & underlying financial records obligations contents by comparing reporting
Reporting at each subsidiary.  Classification and package amounts with the subsidiary
understandability records.
 Accuracy and
Performing the Consolidation packages  Completeness Subsidiary's reporting package is

Accounting Period received from subsidiaries  Occurrence and reconciled with the trial balance
Close - do not accurately reflect the rights and (prepared directly from the subsidiary's
Consolidation & underlying financial records obligations GL). Supporting information for
Reporting at each subsidiary.  Classification and significant items included in the package
understandability is tested for reasonableness.
 Accuracy and
Performing the All trial-balance accounts  Completeness

Accounting Period are not appropriately and  Occurrence and
Close - consistently grouped for rights and
Consolidation & presentation in the financial obligations Internal financial statement packages are
Reporting statements for all  Classification and reconciled to the trial balance and the
accounting periods understandability general ledger. Any post-close adjusting
presented.  Accuracy and journal entries are posted to the final
valuation financial package.
(Detective)
Entries recorded directly to
the financial statements are
not valid.
Performing the Entries recorded directly to  Completeness Entries recorded directly to the financial
Accounting Period the financial statements are  Occurrence and statements require direct approval of the
Close - not valid. rights and entity's principal accounting officer and
183
Financial Reporting
Control Activities
Consolidation & obligations such recording and approval follow a

Reporting  Classification and predetermined process. Entries recorded
understandability directly to the financial statements are
 Accuracy and (1) tracked and recorded in the general
valuation ledger on a timely basis and (2) properly
included in subsequent accounting
periods.
(Detective)
Preparing and All necessary disclosures in  Completeness The entity uses up-to-date disclosure
reviewing draft financial-statement are  Occurrence and checklists (or other suitable
financial-statement not made. rights and mechanisms) to ensure that all relevant
disclosures obligations financial information is disclosed (1)
 Classification and appropriately in accordance with
understandability generally accepted accounting principles
 Accuracy and and the entity's accounting and
valuation 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)
184
Financial Reporting
Control Activities
Preparing and All necessary disclosures in  Completeness An independent review of the financial
reviewing draft financial-statement are  Occurrence and statements and all related disclosures
financial-statement not made. rights and using a generally accepted accounting
disclosures obligations principles financial statement
 Classification and presentation and disclosure checklist (or
understandability other suitable mechanisms) is performed
 Accuracy and by management, the disclosure
valuation 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)
Preparing and All necessary disclosures in  Completeness Management establishes processes to

reviewing draft financial-statement are  Occurrence and ensure that all required disclosure
financial-statement not made. rights and analysis are prepared and reviewed on a
disclosures obligations timely basis. Such review consists of
 Classification and whether disclosures are prepared using
understandability the appropriate assumptions and
 Accuracy and methodology, and whether disclosures
valuation are properly presented 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
185
Financial Reporting
Control Activities
from business units to ensure all relevant

information has been disclosed.
(Detective)
Preparing and All necessary disclosures in  Completeness A list of all sources of event and
reviewing draft financial-statement are  Occurrence and transaction information or other suitable
financial-statement not made. rights and mechanism is used and communicated to
disclosures obligations appropriate personnel to ensure the
 Classification and completeness of disclosed information.
understandability Management, the disclosure committee,
 Accuracy and or other suitably qualified personnel are
valuation involved, as considered necessary, in
analysing the effect of event and
transaction information on the financial-
statement disclosures.
(Preventative)
Preparing and Each financial-statement  Completeness For each financial-statement disclosure,

reviewing disclosure is not prepared in  Occurrence and a supporting analysis is prepared and
financial-statement accordance with generally rights and documented by knowledgeable
disclosures accepted accounting obligations personnel in accordance with relevant
principles (including  Classification and generally accepted accounting principles
relevant regulatory rules) understandability (including relevant regulatory rules) and
and the entity's accounting  Accuracy and the entity's accounting and disclosure
and disclosure policies. valuation policies. An entity-specific 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
186
Financial Reporting
Control Activities
appropriate accounting period.
(Preventative)
Preparing and Each financial-statement  Completeness If third parties assist in the preparation
reviewing disclosure is not prepared in  Occurrence and of financial-statement disclosure
financial-statement accordance with generally rights and information, knowledgeable personnel
disclosures accepted accounting obligations reviews the information prepared by the
principles (including  Classification and third party for reasonableness and
relevant regulatory rules) understandability consistency with the entity's business
and the entity's accounting  Accuracy and and prior-period information. All issues
and disclosure policies. valuation identified through the review are
resolved prior to the disclosure
information being included in the reports
released to the public and filed with
regulatory agencies.
(Detective)
Reviewing and Each financial-statement  Completeness Management and those responsible for
approving the disclosure is not prepared in  Occurrence and oversight of the financial closing and
financial accordance with generally rights and reporting process review the draft
statements accepted accounting obligations financial statements and related
principles (including  Classification and disclosures to be included in external
relevant regulatory rules) understandability reports prior to their release to the
and the entity's accounting  Accuracy and public. The review consists of analysing
and disclosure policies. valuation 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
187
Financial Reporting
Control Activities
audit committee; such approval is

documented.
(Detective)
Reviewing and Each financial-statement  Completeness Management and the audit committee or
approving the disclosure is not prepared in  Occurrence and board of directors are briefed by senior
financial accordance with generally rights and financial reporting personnel on a
statements accepted accounting obligations regular basis and at each period end for
principles (including  Classification and which financial statements are released
relevant regulatory rules) understandability to the public. Such briefing includes a
and the entity's accounting  Accuracy and discussion of key estimates and
and disclosure policies. valuation judgments, significant non-routine
events and transactions, selection and
application of critical accounting
policies, areas with unusual fluctuations,
and other relevant significant issues.
(Detective)
Reviewing and Each financial-statement  Completeness Management accumulates and tracks

approving the disclosure is not prepared in  Occurrence and issues and concerns identified as part of
financial accordance with generally rights and the review of the external reports for
statements accepted accounting obligations each period-end financial closing and
principles (including  Classification and reporting process and follows up on a
relevant regulatory rules) understandability timely basis to verify that items have
and the entity's accounting  Accuracy and been properly resolved in the
and disclosure policies. valuation appropriate accounting period and prior
to the release of the reports to the public.
(Detective)
188
Financial Reporting
Control Activities
Reviewing and The published financial  Completeness The financial statements and related
approving the statements (in print and  Occurrence and disclosures, in print and electronic form,
financial electronic form) are not free rights and are reconciled to the approved financial
statements from publishing, printing, obligations statements, trial balance, and supporting
or electronic-conversion  Classification and information prior to final publishing,
errors. understandability printing, or electronic submission.
 Accuracy and
Reviewing and All related party  Completeness Knowledgeable personnel prepare and
approving the transactions and balances  Occurrence and update a listing of all related-party
financial are not identified and rights and transactions and review appropriate
statements appropriately disclosed in obligations disclosures in the financial statements
consolidation in the  Classification and for completeness and accuracy.
appropriate accounting understandability
period.  Accuracy and (Detective)
valuation
Disclaimer:
This above write-up contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for
detailed research or the exercise of professional judgment or legal provisions. Neither the Internal Audit Department nor any its member can accept any
responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this write-up. The user should refer to latest
legal provisions and bare Act/Rules for guidance and usage. Parts of this write-up are reproduced from the Guidance note issued by ICAI for the
ensuring accuracy. The copyright of the same rest with The Institute of Chartered Accountants of India (ICAI).
189
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Internal Financial Controls Over Financial Reporting: Appendix - 1

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Internal Financial Controls Over Financial Reporting: Appendix - 1

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Internal Financial Controls over Financial Reporting

Risks of Material Control Activities actually

Core Risks and Controls

Bank statements are Trade receivables

Recording of Cash exists in bank Completeness Accounts personnel record

Risks of Material Control Activities actually

ledger. basis; Accounts Manager

Bank statements are

Risks of Material Control Activities actually

journal entry is recorded.

Finance Manager with

Recording of Cash stated in the general Existence; Bank statements are

Finance personnel analyse

Risks of Material Control Activities actually

Risks of Material Control Activities actually

Disbursements  Not recorded Obligations system. The ERP system Obligations;

All manually generated Trade payables

Risks of Material Control Activities actually

Bank statements are Trade payables

Provision for expenses

Bank statements are Long-Term Debt

Risks of Material Control Activities actually

basis. (Detective) Valuation and

Other Possible Risks and Controls

ERP system calculates the

Recording of Non-existent cash on hand Existence Daily bank deposits are

On a periodic basis (and

Risks of Material Control Activities actually

employee(s) who handle

Recording of Cash on hand is not Valuation and On a periodic basis (and

Bank statements are

Risks of Material Control Activities actually

the general ledger. and resolved on a timely [Valuation and

On a periodic basis, finance Long-term/short-term

Risks of Material Control Activities

Core Risks and Controls

Risks of Material Control Activities

Expenses payment has been made. supporting documentation. Management

Risks of Material Control Activities

supporting documentation to record

Finance personnel review the nature and Other expenses

Risks of Material Control Activities

type of expenses incurred, and code the [Occurrence]

Risks of Material Control Activities

Allocation timely basis. (Detective)

Risks of Material Control Activities

Finance personnel prepare journal entries

Risks of Material Control Activities

Other Possible Risks and Controls

Risks of Material Control Activities

creditworthiness and ability to pay on

Core Risks and Controls

trade receivables. (Preventative)

accordance with company policy.

Manual sales return entries made to the Revenue from

Cash/bank Cash/bank receipts:  Completeness On a daily basis, cash/bank receipts Cash

Other Possible Risks and Controls

invoices to consignment customers that is

ERP system validates the amount of the Revenue from

Promotional allowances and volume Revenue from

Other Receivables recorded for  Rights and Management periodically evaluates

recorded:  Valuation and insurance contracts and determining

Risks of Material Control Activities