Appendix 6 - Banking Industry

Identifying and Assessing the Risks of Material Misstatement in the
Financial Statements
Examples of Risks of Material Misstatement Appendix 6
Appendix 6 Banking Industry
This appendix contains example risks applicable to the Banking industry for a selection of
account balances and classes of transactions which have been prepared based on a short
scenario which is presented at the start of each example. These examples may be used in
conjunction with the examples in Appendix 1 Generic/Manufacturing Industry. The risks are
not a comprehensive list of risks and should not be used as a complete listing of risks. Users
of these examples should use them with care and should identify the risks of material
misstatement in respect of their clients Financial Statements and not use these examples as
the defacto listing of Risks and Related Controls for their client. DTTL takes no
responsibility for inappropriate use of these examples by Member Firms, Member Firm
Engagement Teams or any other persons.
Account Balances and Classes of Transactions included within Appendix 6
Each example has a simple outline of the background to the account balance it is critical
that a thorough understanding of the entity and its environment, including the entitys internal
control is obtained to understand risks. This understanding establishes a frame of reference
within which we plan the audit, exercise professional judgment, and identify and assess the
risks of material misstatement. Without this understanding we are unlikely to be able to
effectively identify the risks of material misstatement in the financial statements. Use of these
examples does not remove the need for applying professional judgment in identifying risks of
material misstatements.
6a ACCOUNT BALANCES
Cash in bank
Loans to customers
Loans to financial institutions
Securities and other financial assets at fair value
Deposits from financial institutions
Deposits from customers
Other assets (Banking)
Provisions and accruals
Derivatives
Impairment Losses
Other Liabilities (Banking)
Securities and other financial assets at amortized costs/cost
Debt instruments issued
A.6 Page 2
A.6 Page 3
A.6 Page 5
A.6 Page 6
A.6 Page 8
A.6 Page 11
A.6 Page 14
A.6 Page 16
A.6 Page 19
A.6 Page 22
A.6 Page 25
A.6 Page 26
A.6 Page 28
6b CLASSES OF TRANSACTIONS
Interest Income
Interest expense
Fee and commission income
Fee and commission expense
2010 Deloitte Global Services Limited
A.6 Page 30
A.6 Page 33
A.6 Page 35
A.6 Page 37
A.6 Page 1
Identifying and Assessing the Risks of Material Misstatement in the Financial Statements
Examples of Risks of Material Misstatement Appendix 6a
Appendix 6a Account Balances Banking
Industry: Banking
Account Balance: CASH IN BANK
Scenario:
The entity has a number of bank accounts which include: current, deposit and foreign currency bank accounts. Bank reconciliations are performed on a monthly basis to
reconcile the amount of cash per the bank statement to the general ledger.
Risks of Material Misstatement

Cash is overstated because
o Non-existent cash receipts have been recorded
o Cash receipts have been recorded at an amount higher than
actual receipts
o Cash disbursements have not been recorded
o Cash on hand has been misappropriated/stolen
Cash is understated because
o Not all bank accounts have been recorded in the general
ledger
o Cash existing in the bank account has not been recorded by
the entity.
Assertion(s)
Existence
Completeness
Cash is misstated because:

o Bank accounts denominated in a foreign currency have been
translated using the incorrect exchange rate.
Valuation and allocation
Bank no longer has the right to some or all of the recorded cash
balance
Rights and obligations
Cash stated in the books (general ledger) does not reconcile to

cash in the treasury

Existence
Completeness
Example Control(s)
Cash is counted and reviewed by Head of subsidiaries
on a daily basis. By the end of month, reports are sent
to management for review and approval.
Reconciliations from other banks are reviewed and
approved by management on a monthly basis.
Every day cash accounts are reviewed and approved by
Head of subsidiary. Any unusual items are
investigated.
Cash in other banks are reviewed every month by
management.
Bank reconciliations are reviewed and approved by
management on a monthly basis.
Bank reconciliations are reviewed and approved by
management on a monthly basis (including the
appropriateness of the exchange rate used to convert
bank accounts denominated in a foreign currency to
the functional currency of the entity).
Cash count is reviewed by management to ensure that
cash balances are properly recorded, classified and/or
disclosed within the financial statements.
Cash count is reviewed and approved by management
on a monthly basis.
A.6 Page 2
Industry: Banking
Account Balance: LOANS TO CUSTOMERS
Scenario:
The entity is a bank that provides loans both to corporate and individual clients.
Loans are overstated because:
o Loan receivable was incorrectly recognized at period end before
the loan was provided to customer
o Loan was repaid before period end and incorrectly recognized as
loan receivable at period end
Assertion(s)
Existence
Loans are misstated because:

o Loan was not derecognized from the balance sheet despite derecognition criteria being met.
o Loan was derecognized from balance sheet despite derecognition criteria not being met.
Accounting policies are properly documented and reassessed on a regular basis, accounting policies for
new products are set up before the new product is
launched.
Loans are understated because:

o The bank participates in a syndicated loan but does not
recognize its share.
o Loan provided to customer was not accounted for
o Loan provided to customer before period end was not recorded
until after the period end
Completeness
Appropriate supporting documentation for syndicated

loans is available
Regular reconciliation of all outstanding loans is
performed and independently reviewed and approved.
Loans are misstated due to:

o Received loan instalment payments being allocated to the
incorrect customers account
Valuation and
allocation
Loans are misstated because

o Loans denominated in foreign currencies are not translated using
Valuation and
Allocation
Example Control(s)
Appropriate contractual documentation is verified
before the loan is accounted for
Regular reconciliation of all outstanding loans is
performed
Banking system automatically matches received

payments with customers accounts, payments that
were not matched are investigated
Loan statements are mailed periodically to customers
Exchange rates used by the banking system are
reviewed and approved
A.6 Page 3
o
o

appropriate exchange rate
Fees and commissions related to loan origination are not
appropriately included in the effective interest calculation
Accrued interest is misstated because interest income is not
calculated using the effective interest rate
Assertion(s)
Example Control(s)
Four eyes principles is applied when entering loan
data (e.g. currency, maturity, contractual interest rate)
into the banking system
Appropriate accounting methodology exists for all
types of loans
Interest income is automatically calculated by the
banking system
A.6 Page 4
Industry: Banking
Account Balance: LOANS TO FINANCIAL INSTITUTIONS
Scenario:
The entity places its free resources in short term deposits with other financial institutions

Loans are overstated because:
o Loan is incorrectly recognized at period end before the loan
was provided to financial institution
o Loan was repaid before period end and incorrectly recognized
as receivable at period end
Assertion(s)
Existence

o Loan was not derecognized from the balance sheet despite derecognition criteria being met
o Loan was derecognized from balance sheet despite derecognition criteria not being met
Loans are understated because
o Loans provided to financial institutions are not accounted for
o Loan provided to financial institution before period end was
not recorded until after the period end
Appropriate accounting treatment is assessed and

documented for all types of transactions
Completeness
The transaction cannot be accounted for without the

counterparty confirmation
All open transaction are reconciled on a regular basis

o Loans denominated in foreign currencies are not translated
using appropriate exchange rates
o Accrued interest is misstated because interest income was not
calculated using effective interest rate
Valuation and
Allocation
Example Control(s)
The transaction cannot be accounted for without the
counterparty confirmation
All open transactions are reconciled on a regular basis
Exchange rates used by the banking system are

reviewed
Interest income is automatically calculated by the
banking system
A.6 Page 5
Industry: Banking
Account Balance: SECURITIES AND OTHER FINANCIAL ASSETS AT FAIR VALUE
Scenario:
The entity holds a financial instruments portfolio consisting of different type of securities such as shares, bonds, treasury and commercial bills... as well as different
derivatives such as forwards, interest rate and cross currency swaps...
Depending on its intentions and other criteria all securities and derivatives have been properly classified, in accordance with the accounting framework, as financial
instruments at fair value through profit and loss or financial assets available for sale.

Securities and other financial assets stated in the general ledger do not
reconcile back to the securities and other financial assets register and/or
the reconciliation contains invalid items resulting in securities and other
financial assets being misstated.
Assertion(s)
Completeness Existence
Securities and other financial assets recorded in the entitys books are
misstated because:
o They are not valued correctly in accordance with the applicable
financial reporting framework.
misstated because the terms, conditions and amounts of transactions are
not correctly recorded.
misstated because:
o Transactions are not recorded,
o Transactions are not recorded in the appropriate period
Completeness
Existence
Example Control(s)
Appropriate personnel review to check that front-office
systems and back-office systems are appropriately
reconciled.
Significant reconciling items, if any, are agreed to
supporting documentation.
Management reviews and approves the reconciliation
between securities and other financial assets stated in the
general ledger and the sub register.
Appropriate personnel review transactions to ensure that
they are recorded in accordance with the applicable
financial reporting framework (including recognition of
realized profit and loss) and local regulations.
Management evaluates whether securities and other
financial assets are valued in accordance with its policies
and procedures and accounting policy.
All authorized source documents supporting transactions
and changes are compared to the back-office system to
ensure that they are input properly.
Balances in the accounting system are reconciled to the
back-office systems on a regular basis.
A reconciliation of balances (open trades, income etc.)
between the front-office system and back-office account
A.6 Page 6
Assertion(s)
Example Control(s)
balances in the general ledger, is performed by
appropriate personnel.
overstated because:
o The Entity no longer holds or controls the rights to the securities
and other financial assets recorded at period end.
Securities and other financial assets are overstated because:
o Items that have been disposed of are not removed from the
investments register.
Existence
Securities and other financial assets are understated because:

o Securities and other financial assets acquisitions, for which the
entity takes ownership, are not recorded.
Completeness
Securities and other financial assets are misstated because:

o The prices/exchange rates used for valuation and/or the valuation
techniques are incorrect.
Securities and other financial assets are overstated because:

o Fees/Commissions have been incorrectly capitalized instead of
expensed.
Existence
Entity periodically sends out custodian confirmation

requests for the securities to confirm that securities and
other financial assets it has recorded in its records still
exist and that the entity still has rights to them.
requests for the securities to confirm that investments it
has recorded in its records still exist and that the entity
still has rights to them.
On a monthly basis, management reviews and approves a
listing showing the movement in the total balance broken
down by individual items that make up the balance.
Management reviews transactions before, at, and after
period end to ensure that they are recorded in the
appropriate period.
Market rates are obtained from approved sources (e.g.
Reuters) and entered into the system.
Appropriate personnel agree fair values per unit (for
example share price) to independent sources.
For items which dont have a quoted market price in an
active market or whose fair value is difficult to measure
(for example CCS) management provides details on
valuation methods and/or specialists confirm valuation of
these hard to value items.
All authorized source documents supporting transactions
and changes are compared to the back-office system to
ensure that they are input properly.
An independent party reviews the reconciliations
between front-office systems, back-office systems and
accounting systems on a regular basis and ensures
reconciling items are valid and correctly handled.
A.6 Page 7
Industry: Banking
Account Balance: DEPOSITS FROM FINANCIAL INSTITUITIONS
Scenario:
The entity has deposits from financial institutions which include both term and demand deposits from domestic and foreign institutions
Recorded deposits from financial institutions are understated because:
o Deposits have been received but not recorded in the general
ledger/deposit register
o Deposits received prior to the period end are not recorded until after
the period end
Assertion(s)
Existence
Completeness
Recorded deposits from financial institutions are understated because

deposit repayments/redemption/maturities have been recorded but
disbursements have not been made to the lender
Completeness
Recorded deposits from financial institutions are understated because

recorded disbursements from or charges to deposit accounts are
unauthorized/invalid, recorded twice in error or at inflated amounts
Existence
Recorded deposits from financial institutions are misstated because:

o Deposits were not derecognized from the balance sheet despite
de-recognition criteria being met
o Deposits were derecognized from the balance sheet despite derecognition criteria not being met.
Example Control(s)
Deposit clearing and suspense accounts are reviewed
and amounts are investigated and resolved in a timely
manner.
Deposit Registers, accrued interest and other related
accounts are reconciled to corresponding general ledger
control accounts on a timely basis. All reconciling items
are investigated and resolved in a timely manner, and
reconciliations are reviewed by appropriate
management.
Payments to Interbank and some Corporate
counterparties are processed against Standard
Settlement Instructions or are verified to Customer
Mandates. Interbank Deals have their counterparty
confirmations checked prior to payment release.
Policies and procedures in place over prevention of
unauthorized payments from deposit accounts which
management reviews and updates regularly.
management.
Accounting policies are properly documented and reassessed on a regular basis.
A.6 Page 8

Recorded deposits from financial institutions are misstated due to
inaccuracies in the input and/or processing of deposit transactions,
adjustments or payments
Assertion(s)
Recorded deposits from financial institutions are misstated due to:

o Deposits denominated in foreign currency are not re-stated at yearend to the appropriate foreign exchange spot rate.
o Deposits received in foreign currency are recorded as if received in
domestic currency
Deposit from financial institutions are misstated due to:

o Inaccuracies in the calculation and allocation of accrued interest
expense.
o Invalid interest amounts
Completeness
Example Control(s)
Additions, deletions and adjustments to the Deposit
register are verified to Customer Mandates.
Deposit Registers accrued interest and other related
management.
manner.
The accounting system electronically retrieves currency
exchange rates from an approved source or designated
location, which is updated daily. Exchange rates used
by the banking system are reviewed and approved.
The operations group performs a daily FX comparison.
Fluctuations exceeding a predefined threshold are
analyzed for accuracy.
Management periodically reviews recorded deposit
activity based on knowledge of day-to-day activities.
Any discrepancies are investigated and resolved timely.
Detailed records of deposits, accrued interest and other
related accounts maintained are reconciled to
corresponding general ledger control accounts on a
timely basis, all reconciling items are investigated
immediately and cleared, and reconciliations are
reviewed by appropriate management.
The deposit system is programmed to automatically
calculate and accrue deposit interest based on the terms
of the deposit agreements.
Any changes made to deposit interest rates are
compared to authorized source documents by someone
independent of the process to ensure they were input
A.6 Page 9
Assertion(s)
Demand deposits are classified as term deposits or term deposits are

classified as demand deposits.
Classification and
understandability
Example Control(s)
accurately.
Deposit interest expense and related ratios are reviewed
by management, including comparison to the budgets.
A.6 Page 10
Industry: Banking
Account Balance: DEPOSITS FROM CUSTOMERS
Scenario:
Deposits from customers include both term and demand deposits

Recorded deposits from customers are understated because:
o Deposits have been received but not recorded in the general
ledger/deposit register
o Deposits received prior to the period end are not recorded until after
the period end
Recorded deposits from customers are understated because deposit

repayments/redemption/maturities have been recorded but disbursements
have not been made to the customer
Recorded deposits from customers are understated because recorded
disbursements from or charges to deposit accounts are
unauthorized/invalid, recorded twice in error or at inflated amounts
Assertion(s)
Existence
Completeness
Existence
Recorded deposits from customers are misstated due to inaccuracies in

the input and/or processing of deposit transactions, adjustments or
payments
Example Control(s)
manner.
management.
The policies and procedures over prevention of
unauthorized payments from deposit accounts should be
documented and reviewed and updated regularly.
Policies and procedures in place over prevention of
unauthorized payments from deposit accounts which
management reviews and updates regularly.
management.
Additions, deletions and adjustments to the Deposit
register are verified to Customer Mandates.
Deposit Registers accrued interest and other related
A.6 Page 11
Assertion(s)
Recorded deposits from customers are misstated due to:

o Deposits denominated in foreign currency are not re-stated at
year-end to the appropriate foreign exchange spot rate.
o Deposits received in foreign currency are recorded as if
received in domestic currency
Deposit from customers are misstated due to:

o Inaccuracies in the calculation and allocation of accrued interest
expense.
o Invalid interest amounts
Customer deposits are recorded in the incorrect general ledger account
Classification and
understandability
Example Control(s)
management.
manner.
The operations group performs a daily FX comparison.
Fluctuations exceeding a predefined threshold are
analyzed for accuracy.
Any changes made to deposit interest rates are
compared to authorized source documents by someone
independent of the process to ensure they were input
accurately.
Deposit interest expense and related ratios are reviewed
by management, including comparison to the budgets.
A.6 Page 12
Assertion(s)
Example Control(s)
A.6 Page 13
Industry: Banking
Account Balance: OTHER ASSETS (BANKING)
Scenario:
Other assets are made up of the following:
1) Prepayments
2) Repossessed property
3) Accrued income (e.g., fees on payment transactions)
4) Deferred loan acquisition / origination costs

Other assets are overstated because:
o Asset related transactions that have occurred during the period are
recorded as other assets instead of expenses.
o Amounts recorded in other assets relate to fictitious or unauthorized
transactions
o Amounts recorded in other assets relate to unsupported suspense
account balances
o Other assets previously correctly recorded no longer exist and their
disposal/adjustment has not been recorded (e.g., deferred cost
relating to impaired or repaid loans)
Other assets are understated because asset-related transactions that have
occurred during the period are recorded as expenses instead of other
assets
Assertion(s)
Completeness
Existence
Completeness
Other assets are misstated due to:

o Transactions in other assets being recorded in the wrong period
o Amounts recorded in other assets do not reconcile to source
documentation and/or the reconciliation contains invalid items
o Errors in the amortization and allocation of deferred loan
acquisition/origination costs
o Errors in the calculation and allocation of prepaid expenses
Existence
Completeness
Example Control(s)
Monthly reporting packages are reviewed and approved
by management and any major deviations are
investigated and resolved timely.
Material other assets are reconciled to source documents
and approved by management on a monthly basis.
Asset-related transactions at, before or after year end of
an accounting period are scrutinized and/or reconciled
to ensure complete and consistent recording in the
accounting period.
accounting period.
accounting period.
Material other assets are reconciled to source documents
and approved by management on a monthly basis.
The accounting system automatically calculates
amortization of loan acquisition/origination fees daily
based on information contained in loan master files and
transaction records. The system calculations are
A.6 Page 14
Repossessed property following the foreclosure on loans that are in

default are not correctly measured at the lower at the lower of its
carrying amount and fair value less costs to sell resulting in other assets
being overstated.
Assertion(s)
Example Control(s)
reviewed for reasonableness.
Management reviews the listing of repossessed assets
and evaluates whether these are valued in accordance
with the entitys policies and procedures and accounting
policy.
A.6 Page 15
Industry: Banking
Account Balance: PROVISIONS AND ACCRUALS
Scenario:
Provisions include Other assets are made up of the following:
1) Provisions in respect of costs arising from the following:
a. Contingent assets
b. Contingent liabilities
c. Contractual commitments, including guarantees
2) Provisions for certain legal claims
Accrued expenses relates to goods and services received / rendered for which invoices were not received
Note: Provisions for employee benefits not included if required then it would be supplemented
Interest expense accruals are excluded as presumed they are covered within Due to banks / Due to customers, etc

Provisions are understated because a provision has not been recorded
Assertion(s)
Completeness
Provisions are misstated because:
Example Control(s)
Management regularly communicates with legal counsel
to obtain an update on any pending or threatened
litigation and assesses whether or not such litigation
could give rise to a provision which would need to be
recorded in the general ledger or disclosed in the
financial statements.
Reports are produced detailing specific provisions and
variances to budget. These reports are reviewed by
management monthly. Any discrepancies and
significant variances to budget and prior periods are
investigated and resolved in a timely manner.
Legal Department/Finance Director, Board of Directors
sanction reduction or removal of the provisions made
for contingent assets or contingent liabilities in line with
delegated discretion and entitys policies and
procedures.
Management regularly communicates with legal counsel
A.6 Page 16
o
o
o

estimates are incorrect due to:
Bias
Incorrect techniques being used in the calculation
Incorrect data being used in the calculation
Restructuring provisions or provisions for legal cases not recognized
in accordance with the applicable accounting policy
Costs associated with contingent assets, contingent liabilities and
contractual commitments, including guarantees not recognized in
accordance with the applicable accounting policies and / or
regulatory requirements
Material effect of the time value of money is not considered and the
related provisions is not the present value of the expenditures
expected to be required to settle the obligation
Assertion(s)
Provisions are misstated because not recognized in the appropriate

period
Completeness
Existence
Provisions are overstated because it is no longer probable that an outflow

of resources embodying economic benefits will be required to settle the
obligation.

Valuation
Accrued expenses are overstated because they include item(s) that will
not be charged to the entity.
Accrued expenses are understated because some accrued expenses have
been intentionally or unintentionally excluded (e.g., goods received or

Completeness
Example Control(s)
to obtain an update on any pending or threatened
litigation and assesses whether or not such litigation
could give rise to a provision which would need to be
recorded in the general ledger or disclosed in the
financial statements. Management, in conjunction with
legal counsel, will prepare an estimate of the provision.
All accounting estimates are appropriately documented
and reviewed and approved by management and, where
appropriate, those charged with governance to ensure
the provision has been recorded in accordance the
applicable accounting policy and / or regulatory
requirements.
Experts are involved in making accounting estimates
requiring specialized knowledge.
Management regularly reviews provisions, and
discounts the provisions, where the effect of the time
value of money is material, using a pre-tax discount rate
(or rates) that reflect(s) current market assessments of
the time value of money and those risks specific to the
liability that have not been reflected in the best estimate
of the expenditure.
Management reviews contingent liabilities, and consider
the need to record additional provision.
Management considers the effects of subsequent events
to provision and contingent liability.
Provisions are reviewed at the end of each reporting
period and adjusted to reflect the current best estimate.
If it is no longer probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation, the provision is reversed.
Management reviews recorded accrued expenses based
on its knowledge of day-to-day activity.
A.6 Page 17

services rendered are not recorded prior to receipt of invoice, etc)
Accrued expenses are overstated because:
o Expenses that have been paid have not been removed from the
accrued expenses account balance
o The accrued expenses account balance includes fictitious expenses
Assertion(s)
Existence
Example Control(s)

Accrued expenses are reconciled to the supporting detail
and differences are resolved in a timely manner.
Management, independent employees, or internal
auditors perform direct tests of the recording and
reconciliation.
A.6 Page 18
Industry: Banking
Account Balance: DERIVATIVES
Scenario:
The entity has the following types of derivatives:
Derivatives held for trading
Derivatives designated as effective hedges and therefore subject to Hedge Accounting

Derivatives are overstated because:
o The derivatives portfolio includes positions that have never existed
o Derivatives that have been closed are not removed from the derivatives
portfolio
o Derivatives acquired/sold subsequent to the period end are incorrectly
recorded before the period end
Assertion(s)
Existence
Completeness
Derivative are understated because:

o Open derivative contracts are not recorded or fair valued.
Completeness
Example Control(s)
The entity has detailed and documented investment and
accounting policies related to the use of derivative
instruments. Such policies detail:
o The entitys intended purpose for derivatives (i.e.,
hedging or speculative).
o Roles and responsibilities of the individuals
involved with the derivatives
o The authorization structure for transactions,
including the involvement of the Board of Directors
and/or senior management.
o Valuation policies and procedures
Changes to those policies are approved by the Board of
Directors/Investment Committee/Risk Committee.
On a monthly basis, management reviews and approves
the derivatives portfolio report showing the movement
in the total derivatives balance broken down by
individual derivative instruments.
Management reviews derivative transactions before, at,
and after period end to ensure that they are recorded in
the appropriate period.
Management reviews investment transactions to
determine whether they are conducted in compliance
with investment policies and procedures and accounting
policy.
A.6 Page 19
o
o

Derivative contracts are only recorded when actual cash settlement
occurs (i.e., on cash basis).
Derivatives contracts entered into prior to the period end are not
recorded until after the period end.
Assertion(s)
Derivatives recorded in the entitys books are misstated because:

o They are inaccurately recorded (e.g., Positions sold short are
recorded as if acquired long, notional amounts/strike prices are
incorrectly input)
o Fictitious derivative deals are input into the derivatives trading
system
o Fees and commission incurred on derivative positions are not
accounted for correctly per the applicable accounting policy.
Existence
Derivatives recorded in the entitys books are misstated because:

o Derivatives (including embedded derivatives) are not valued
correctly in terms of the applicable accounting policy.
o Fair values of open derivatives are recorded in the wrong direction
(Out-of money positions are recorded as in-the money positions
or vice versa, derivative assets are recorded as derivative liabilities
or vice versa).
o Derivative transactions denominated in foreign currency are not
translated at the appropriate foreign exchange spot rate
Example Control(s)
Management periodically reviews the entity's
investment policies and procedures and accounting
policy for appropriateness and compliance with the
applicable reporting framework.
Management reviews investment transactions before, at,
Entitys internal audit periodically sends out
counterparty confirmation requests for the securities to
confirm that derivatives it has recorded still exist and
that the entity still has rights to them.
Systems access and profiles to input or authorize
derivative deals are restricted. Detailed procedures
governing Logical Access to derivatives trading systems
are documented in the Systems Access Policy.
Management evaluates whether derivatives are valued
in accordance with its policies and procedures and
accounting policy.
A.6 Page 20
Derivatives classified as effective hedges and accounted for using hedge

accounting do not meet the criteria for an effective hedge.
Derivatives are classified as held for trading (speculative) when they are held
for hedging and meet the criteria for an effective hedge.
Assertion(s)
Classification and
understandability
Example Control(s)
The entity has a detailed and documented investment
and accounting policies related to the use of derivative
instruments. Such policies detail:
o The entitys intended purpose for derivatives (i.e.,
hedging or speculative)
o Roles and responsibilities of the individuals
involved with the derivatives
o The authorization structure for transactions,
including the involvement of the Board of Directors
and/or senior management
o Valuation policies and procedures
Management/Risk Manager periodically assesses the
effectiveness of hedging instruments to ensure that these
are recorded in accordance with the applicable reporting
framework.
A.6 Page 21
Industry: Banking
Account Balance: IMPAIRMENT LOSSES
Scenario:
The entity is a bank that provides loans both to corporate and individual clients. This guide focuses only on impairment losses on loans granted to customers/financial
institutions assuming that such loans are carried at amortized cost less accumulated allowance for impairment.

Impairment losses are understated due to overly optimistic view on the
deteriorating economic conditions which impact the recoverability of loans
(e.g., assumptions on refinancing, expected changes in interest rates,
unemployment, GDP trends)
Assertion(s)
Impairment losses are understated due to:

o Understatement of total exposure used in the calculation of
individual and collective impairment provisions (e.g., omission of
accrued interest, other loan products granted to the defaulting
customer).
o Non-assessment of all individual impairment loans or omission of
Completeness
Example Control(s)
The basis for determining fair values of doubtful
loans is detailed and documented and the
underlying elements of the determination (e.g.,
discount rates used in present value computations,
market values, etc) are appropriate and verifiable
The bank documents its analysis and estimate of the
provision for loan losses in sufficient detail for
senior management, the Board, regulatory
examiners and auditors to independently form
conclusions about the overall adequacy of the
provision.
Monthly Impairment Provisions Reports are
produced detailing specific provision and variances
to budget. These reports are reviewed by
management (e.g., Heads of Credit /Risk Manager)
and/or the Credit Committee. Any discrepancies
and significant variances to budget and prior
periods are investigated and resolved timely.
Each quarter, provisions are reviewed and approved
by management (e.g., Finance Director and
Director-Credit Risk).
Management (e.g., Head of Credit) reviews
impairment calculations to ensure accuracy of data.
The Credit Committee sanctions reduction /
removal of the provisions in line with the entitys
policies and procedures.
Individually assessed cases and revised cash flows
A.6 Page 22
o
o
o
o
o
o

individually impaired loans in the specific provisions
Removal/reversal of impairment provisions on loans that are still
impaired.
Non-inclusions of all loans that not considered individually
impaired in the assessment of incurred-but-not-reported (IBNR)
impairment losses.
Overstatement of expected future cash flows or the realizable values
of collateral where defaults have occurred.
Understatement of probabilities of default and/or probability of
repossession given a default
Omission of cost of default/recovery in the calculation of
impairment losses.
Impairment losses not being adjusted for expected (lifetime) losses.
Assertion(s)
Impairment losses are understated as provisions for impaired loans are

not recorded in the loans ledger as they are recognized.
Completeness
Impairment losses are misstated due to:

o Incorrect grading/classification of loans for purposes of calculating
collective impairment
o Use of incorrect inputs (e.g., exposure amount, probability of
defaults, probability of repossession given default, expected future
cash flows, exchange rates, etc
o Expected future cash flows are not discounted or are discounted
Existence
Example Control(s)
are reviewed as frequently as necessary. Cash flows
are reviewed and approved by management and
Risk Managers expectations / assumptions are
challenged where appropriate. The treatment of
recovery costs are also reviewed as part of this
process.
Provisions (above specified thresholds) are
validated and approved by the Credit Committee.
During this process the Credit Committee may also
challenge assumptions in the cash flow / recovery
assumptions.
The loan system is programmed to identify and
report delinquent loans, and such reports are
routinely reviewed to identify loans that may be
impaired. (e.g., exception reports for excesses over
limits, late repayments, etc...).
All risk inputs and assumptions are reviewed and
updated as appropriate (e.g., monthly, quarterly,
annually, etc...) by management (e.g., Risk
Manager) and/or the Credit Committee.
management (e.g., Heads of Credit/Risk Manager)
Changes in assumptions used and loan grades are
approved by the Credit Committee and
management (e.g., the Finance Director) before
being executed.
Provisions (above specified thresholds) are
validated and approved by the Credit Committee.
During this process the Credit Committee may also
A.6 Page 23
using inappropriate discount rate in determining present value.
Impairment losses are overstated because:

o Recoveries made from customers have not been recorded within the
loans /accumulated provisions ledger
o Recoveries made from an obligor being allocated to the incorrect
customers account
o Loan derecognized from the balance sheet are still being included in
the calculation of IBNR impairment losses or collective impairment.
Assertion(s)
Impairment provisions are recorded in the incorrect ledger account
Classification and
understandability
Example Control(s)
challenge assumptions in the cash flow / recovery
assumptions.
Loans are monitored by the relationship managers
in a manner appropriate for the institution's types of
loans.
The Credit Committee reviews / endorses / amends
the proposed recovery strategies for troubled
accounts and/or watch list where appropriate.
Minutes and action points of the credit committee
meetings are distributed to the Credit Committee
members for follow up.
Write-offs are approved at an appropriate level of
management or the Board.
management (e.g., Heads of Credit /Risk Manager)
A.6 Page 24
Industry: Banking
Account Balance: OTHER LIABILITIES (BANKING)
Scenario:
Other liabilities include:
o Unclaimed payments
o Deferred income
o Sundry creditors

Other liabilities are overstated because:
o Amounts recorded in other liabilities relate to fictitious or
unauthorized transactions
o Amounts recorded in other liabilities relate to unsupported suspense
account balances or fictitious transactions
Assertion(s)
Existence
Other liabilities are understated because:

o Transactions that have occurred during the period are recorded as
income instead of deferred income
o Transactions that occurred during the period have been intentionally
or unintentionally excluded.
Completeness
Other liabilities are misstated due to:

o Transactions being recorded in the wrong period
o Amounts recorded in other liabilities do not reconcile to source
documentation and/or the reconciliation contains invalid items
o Errors in the amortization and allocation of deferred loan origination
fees or other deferred income
Completeness
Example Control(s)
Management reviews recorded other liabilities
based on their knowledge of day-to-day activity of
the entity.
Material other liabilities are reconciled to the
supporting detail and differences are resolved in a
timely manner. Management, independent
employees, or internal auditors perform direct tests
of the recording and reconciliation.
Monthly reports are reviewed and approved by
management and any major deviations are
investigated and resolved in a timely manner.
Management reviews recorded other liabilities
based on their knowledge of day-to-day activity of
the entity.
Transactions at, before or after year end of an
accounting period are scrutinized and/or reconciled
accounting period.
The accounting system automatically calculates
amortization of loan origination fees daily based on
information contained in loan master files and
reviewed for reasonableness. Any discrepancies
identified are resolved in a timely manner.
A.6 Page 25
Industry: Banking
Account Balance: SECURITIES AND OTHER FINANCIAL ASSETS AT AMORTIZED COST/COST
Scenario:
The entity holds a financial instruments portfolio consisting of different type of securities such as shares, bonds, treasury, commercial bills and other financial assets.
Depending on its intentions and other criteria all securities have been properly classified, in accordance with the accountin g framework, as other financial assets at amortized
cost

Securities and other financial assets stated in the general ledger do not
reconcile back to the securities and other financial assets register and/or the
reconciliation contains invalid items resulting in securities and other financial
assets being misstated.
Assertion(s)
Completeness
Existence
Securities and other financial assets at amortized cost/cost are overstated

because:
o Items that have been disposed of are not removed from the
investments register.
o Amounts recorded in securities and other financial assets relate to
fictitious or unauthorized transactions
o Securities and other financial assets acquired subsequent to the
period end are incorrectly recorded before the period end
Existence
Completeness
Securities and other financial assets are overstated because :

o Provisions for impairments/irrecoverable amounts are not recorded
in the asset ledger
o Securities and other financial assets at amortized cost/cost are not
Existence
Example Control(s)
Appropriate personnel review to ensure that front-office
systems and back-office systems are appropriately
reconciled.
Significant reconciling items, if any, are agreed to
supporting documentation.
Management reviews and approves the reconciliation
between securities and other financial assets stated in
the general ledger and the sub register.
listing of securities and other financial assets. Any
major deviations are investigated and resolved timely.
Material securities and other financial assets are
reconciled to source documents and approved by
management on a monthly basis.
Management reviews security transactions before, at,
Management reviews and makes provisions for
impaired/irrecoverable amounts. Such review includes
comparison of the carrying value of securities and other
financial assets against the estimated realizable values
A.6 Page 26
assessed for impairment.
Assertion(s)
Securities and other financial assets recorded in the entitys records are
overstated because the entity does not hold or control the rights to securities
and other financial assets at the balance sheet date
Securities and other financial assets are understated because acquisitions, for
which the entity takes ownership, are not recorded.
Completeness
Securities and other financial assets are misstated because:

o Transactions are initially recorded at the incorrect amount
o Errors in application of effective interest rate method in the
calculation of amortized cost
o The exchange rates used to retranslate amounts denominated in
foreign currencies are incorrect
o Fees/Commissions incurred and directly attributed to the acquisition
of the securities and other financial assets have been incorrectly
expensed instead of being included in the calculation of effective
interest rate.
Example Control(s)
or current market prices of the securities.
Management reviews and approves the provision for
impairment.
requests for the securities to confirm that securities and
other financial assets it has recorded in its records still
exist and that the entity still has rights to them.
a listing showing the movement in the total balance
broken down by individual items that make up the
balance.
Management reviews transactions before, at, and after
period end to ensure that they are recorded in the
appropriate period.
All authorized source documents supporting
transactions and changes are compared to the backoffice system to ensure that they are input properly.
Statements received from correspondent
banks/counterparties are reconciled to the appropriate
accounts in the entitys subsidiary ledgers and
differences are investigated.
Exchange rates are obtained from approved sources
(e.g., Reuters) and entered into the system.
A.6 Page 27
Industry: Banking
Account Balance: DEBT INSTRUMENTS ISSUED
Scenario:
Debt instruments issued include Commercial Paper, Corporate Bonds, Convertible Bonds, Preference Shares and Subordinated Notes

Debt instruments issued are overstated because
o Debt instruments issued subsequent to the period end are incorrectly
recorded before the period end
o Redemptions or repayments are made but not recorded
Debt instruments issued are overstated due to incorrect recognition in respect
to facility agreement
Assertion(s)
Existence
Completeness
Debt instruments issued are misstated due to:

o Inaccuracies in the input and/or processing of the amount and/or
terms of borrowings
o Incorrect application of the effective interest method
o Transaction costs (fees and commissions) directly attributed to the
issuance of the debt securities are expensed instead of being adjusted
against the value of the debt instruments issued, on initial recognition
o Incorrect treatment for embedded derivatives with respect to
convertible bonds
o Debt securities denominated in foreign currency are re-translated at
incorrect rates or not retranslated at all.
Recorded debt is understated because
o Financing has been obtained but not recorded in the general
ledger/loan register
o Debt instruments issued prior to the period end are not recorded
until after the period end
o A redemption has been recorded but disbursement has not been
made to the lender
o A disbursement is recorded twice in error or at an inflated amount
Completeness
Example Control(s)
Bond/Note holdings are reconciled to statements
received from lenders and differences are investigated
and resolved in a timely manner.
Management reviews the facility agreements and
supplements for compliance with covenants attaching to
the debt securities and to assess status of debt securities
issued on a monthly basis.
Additions, deletions and other changes to the loan
register are compared to the loan agreement to ensure
that they were input accurately.
Management periodically reviews the entity's funding
policies and procedures as well as accounting policy for
appropriateness and compliance with the applicable
reporting framework.
Appropriate accounting methodology exists for
transaction costs attributed to debt instruments issued.
Exchange rates are obtained from approved sources
(e.g., Reuters) and entered into the system.
Bond/Note holdings are reconciled to statements
received from lenders and differences are investigated
and resolved in a timely manner.
The listing/register of debt securities issued is
periodically reviewed by management for accuracy and
ongoing pertinence.
Payments to Corporate counterparties are processed
against Standard Settlement instructions or are verified
A.6 Page 28
Assertion(s)
Debt Securities issued are misstated due to repayments/redemptions being

recorded in the incorrect period or incorrect general ledger account
Existence
Completeness
Debt Securities issued are overstated as items meeting the definition of equity
are classified as liability
Classification and
understandability
Example Control(s)
to Lenders Mandates/agreements.
Systems access and profiles to input or authorize debt
security transactions are restricted. Detailed procedures
governing Logical Access to the systems are contained
in the Systems Access Policy.
Management anticipates scheduled redemptions which
are reviewed to ensure that all payments are made and
recorded accurately and timely.
Management periodically reviews the entity's funding
policies and procedures as well as accounting policy for
appropriateness and compliance with the applicable
reporting framework.
A.6 Page 29
Examples of Risks of Material Misstatement Appendix 6b
Industry: Banking
Account Balance: INTEREST INCOME
Scenario:
Interest income earned by the entity mainly arises from the following:
i) Loans to customers (commercial loans, retail loans and mortgages loans);
ii) Loans to or deposits placed with other financial institutions.

Interest income is understated because:
o Not all performing loans are charged interest
o Performing loans are incorrectly designated to non-accrual
status
Assertion(s)
Completeness
Interest income is misstated because changes to interest rates are not

appropriately authorized and recorded within the system.
Occurrence
Example Control(s)
Management periodically reviews interest income
activity and loan interest income yields including
comparison to the budgets. Any discrepancies are
Nonaccrual designations, and restorations of accrual
status, are approved by appropriate management.
Listing of non-performing loans or delinquency reports
are reviewed to ensure there is appropriate follow-up
with delinquent borrowers to determine whether the
loans should be placed on nonaccrual status.
Interest rates applicable to the various loan products are
pre-set within the Banks System. Where the rates are
negotiated, the agreed interest rate is set up front when
the customer signs the facility documentation accepting
the terms and conditions of the agreement.
Any new rates offered to customers are approved by the
Banks Interest Rate Committee prior to being recorded
in the system.
Where account relationship managers have discretion to
negotiate interest terms for business overdrafts, business
term loans and flexible business loans, such discretion is
within specified interest and fee margins. Any deals
which fall outside these margins require written
approval from designated authorized
personnel/committee.
New changes to interest rates are submitted for input
A.6 Page 30
Assertion(s)
Interest income is misstated because:

o Interest income is calculated and charged incorrectly
o Interest is not accrued using the effective rate
o Transactions denominated in foreign currency are not translated
at the appropriate foreign exchange transaction rate
Accuracy
Interest income is misstated because transactions are recognized in the

incorrect period.
Cutoff
Interest income is overstated due to accrual of interest on nonperforming loans or loans on non-accrual status:
Occurrence
Interest income is misstated because:

o Interest income transactions are inappropriately off set against
interest expense transactions
o Interest income transactions are recorded in the incorrect
general ledger account
Classification
Example Control(s)
into the banking systems by authorized personnel. Once
the changes have been made in the system by an
independent person, a copy of the relevant interest
tables is returned to the authorized personnel to verify
the information has been loaded in the system correctly.
The loan system is logically programmed to accurately
calculate loan interest and allocate loan payments
between principal and interest.
location, which is updated daily. The pricing system
verifies that the currency exchange rate transmission is
current day by checking the transmissions date, time
and record count.
Interest transactions at, before or after year end of an
accounting period are scrutinized and/or reconciled to
ensure complete and consistent recording in the
accounting period.
Nonaccrual designations, and restorations of accrual
status, are approved by appropriate management.
Listing of non-performing loans or delinquency reports
are reviewed to ensure there is appropriate follow-up
with delinquent borrowers to determine whether the
loans should be placed on nonaccrual.
Appropriate accounting policies exist for recording and
classifying interest income transactions. Management
A.6 Page 31
Assertion(s)
Example Control(s)
reviews the interest income transactions to ensure the
transactions are recorded in accordance with the
established accounting policies.
A.6 Page 32
Industry: Banking
Account Balance: INTEREST EXPENSE
Scenario:
Interest expense incurred by the entity mainly results from the following:
i) Customer deposits
ii) Loans and deposits from other financial institutions.
iii) Other long term funding (e.g., corporate bonds, commercial papers, subordinated debt etc...)

Interest expense is overstated because:
o Transactions included in interest expense have not occurred
o Amounts recorded in interest expense relate to fictitious or
unauthorized transactions.
Assertion(s)
Occurrence
Interest expense is misstated because changes to interest rates are not

appropriately authorized and recorded within the system.
Occurrence
Example Control(s)
Monthly reports (including comparison to the budgets)
are reviewed and approved by management and any
Statements received from lenders are reconciled to the
appropriate accounts in the entitys subsidiary ledgers
and differences are investigated and resolved timely.
management.
Interest expense transactions are tested on a sample
basis by management to ensure the transactions have
occurred.
Interest rates applicable to the various deposit accounts
are pre-set within the Banking System. Where the rates
are negotiated, the agreed interest rate is set up front
when the customer/lender signs the facility
documentation accepting the terms and conditions of the
agreement.
Any new rates offered to customers are approved by the
Banks Interest Rate Committee prior to being recorded
in the system.
A.6 Page 33
Assertion(s)
Interest expense is misstated because:

o Interest expense is recorded at the incorrect amount
o Errors exist in the calculation
o Interest expense is not accrued using the effective rate
Accuracy
Interest expense is misstated because transactions are recorded in the

incorrect period.
Cutoff
Interest expense is misstated because:

o Interest expense transactions are inappropriately off set against
interest income transactions
o Interest expense transactions are recorded in the incorrect
general ledger account
Classification
Example Control(s)
negotiate interest terms for commercial customers, such
discretion is within specified interest margins. Any
deals which fall outside these margins require written
approval from designated authorized
personnel/committee.
New changes to customer deposit interest rates are
submitted for input into the banking systems by
authorized personnel. Once the changes have been
made in the system by an independent person a copy of
the relevant interest tables is returned to the authorized
personnel to verify the information has been loaded in
the system correctly.
Statements received from lenders are reconciled to the
appropriate accounts in the entitys subsidiary ledgers
and differences are investigated and resolved timely.
Interest transactions at, before or after year end of an
accounting period are scrutinized and/or reconciled to
ensure complete and consistent recording in the
accounting period.
classifying interest expense transactions. Management
reviews the interest expense transactions to ensure the
transactions are recorded in accordance with the
established accounting policies.
A.6 Page 34
Industry: Banking
Account Balance: FEES AND COMMISSION INCOME
Scenario:
The entitys fees and commission income is earned in respect of services rendered by the bank and include loan/facility arrangement fees, security fees, guarantee/indemnity
fees, payment services, transaction fees, insurance brokerage fees, investment management fees etc...

Fee and commission income is understated because not all transactions
resulting in fees and commissions income are recorded in the system
Assertion(s)
Completeness
Fee and commission income is misstated because changes to fee tariffs

are not appropriately authorized and recorded within the system.
Occurrence
Fee and commission income is misstated because:
Accuracy
Example Control(s)
Fees/commissions are set up front when the customer
signs the facility documentation accepting the terms and
conditions of the agreement.
Management reviews recorded fees and commissions
based on their knowledge of day-to-day activity of the
entity. These reviews include comparison of
movements in recorded fee/commission income to the
volume of fee generating activities (e.g., new
loans/products originated during the period, money
transfers, value of assets under management). Any
are reviewed and approved by Management and any
Any new tariffs offered to customers are approved by
appropriate personnel. Once the changes have been
made in the system by an independent person, a copy of
the relevant fee tariff tables is returned to the authorized
personnel to verify the information has been loaded in
the system correctly.
negotiate fee/commission terms for commercial
customers, such discretion is within specified fee
discounts. Any tariffs which fall outside these discounts
require written approval from designated authorized
personnel.
Fee/commission transactions are tested on a sample
A.6 Page 35
o
o

Transactions are recorded at the incorrect amount
Transactions denominated in foreign currency are not translated
Assertion(s)
Fee and commission income is misstated because income is recorded in

the incorrect period.
Cutoff
Fee income is overstated because loan origination fees are recognized in

full as income instead of being appropriately included in the effective
interest rate calculation (i.e., amortized over the life of the loan)
Fee income is overstated because:

o Transactions included in fee and commission income have not
occurred
o Amounts recorded in fee and commission income relate to
fictitious or unauthorized transactions.
Fee and commission income is misstated because:
o Fee and commission income transactions are inappropriately
off-set against fee and commission expenses
o Fee and commission income transactions are recorded in the
incorrect general ledger account
Occurrence
Classification
Example Control(s)
basis by management for correct recording.
Fee/commission transactions at, before or after year end
of an accounting period are scrutinized and/or
reconciled to ensure complete and consistent recording
in the accounting period.
Appropriate accounting policies exist for all loan
origination or acquisition fees.
The banking system automatically accretes loan
origination fees based on information contained in loan
master files and transaction records. The system
calculations are reviewed for reasonableness. Any
discrepancies are investigated and resolved timely.
classifying fees and commissions. Management
reviews the fee and commission income transactions to
ensure the transactions are recorded in accordance with
the established accounting policies.
A.6 Page 36
Industry: Banking
Account Balance: FEES AND COMMISSION EXPENSE
Scenario:
The entitys fees and commission expense is incurred in respect of services rendered to the entity by other financial institutions and includes fees incurred on hedging
activities

Fee and commission expense is overstated because:
o Transactions included in fee and commission expense have not
occurred
o Amounts recorded in fee and commission expense relate to
fictitious or unauthorized transactions.
Assertion(s)
Occurrence
Fee and commission expense is overstated because transactions which

should have been included in the effective interest rate calculation are
expensed in full when paid.
Occurrence
Fee and commission expense is understated because:

o Not all transactions resulting in fee and commission expense
are recorded in the system.
o Transactions which should have been expensed in full are
capitalized
Completeness
Example Control(s)
Statements received from correspondent banks, lenders,
counterparties in hedging activities and other financial
institutions are reconciled to the appropriate accounts in
the entitys subsidiary ledgers and differences are
Appropriate accounting policies exist for
fees/commissions. Management reviews fee and
commission expense transactions to ensure the
transactions are recorded with the established policies.
The banking system automatically calculates
amortization of loan acquisition/origination fees based
on information contained in loan master files and
reviewed for reasonableness.
Appropriate accounting policies exist for
fees/commissions. Management reviews fee and
A.6 Page 37
Fee and commission expense is misstated because:

o Transactions are recorded at the incorrect amount
o Errors exist in the calculation
Assertion(s)
Accuracy
Fee and commission expense is misstated because income is charged in

the incorrect period.
Cutoff
Fee and commission expense is misstated because:

o Fee and commission expense transactions are inappropriately
off-set against fee and commission income
o Fee and commission expense transactions are recorded in the
incorrect general ledger account
Classification
Example Control(s)
commission expense transactions to ensure the
transactions are recorded with the established policies.
investigated.
Management periodically reviews fee and commission
expense activity including comparison to the budgets
and loan activities. Any discrepancies are investigated
and resolved timely.
Fee/commission transactions at, before or after year end
of an accounting period are scrutinized and/or
reconciled to ensure complete and consistent recording
in the accounting period.
Monthly reporting (including comparison to the
budgets) are reviewed and approved by Management
and any major deviations are investigated and resolved
timely.
classifying fees and commissions. Management
reviews the fee and commission expense transactions to
ensure the transactions are recorded in accordance with
the established accounting policies.
A.6 Page 38

Appendix 6 - Banking Industry

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Appendix 6 - Banking Industry

Uploaded by

Copyright:

Available Formats

Identifying and Assessing the Risks of Material Misstatement in the

2010 Deloitte Global Services Limited

Risks of Material Misstatement

Cash is misstated because:

Valuation and allocation

Rights and obligations

Cash stated in the books (general ledger) does not reconcile to

Valuation and allocation

2010 Deloitte Global Services Limited

Loans are misstated because:

Rights and obligations

Loans are understated because:

Appropriate supporting documentation for syndicated

Loans are misstated due to:

Loans are misstated because

2010 Deloitte Global Services Limited

Banking system automatically matches received

Risks of Material Misstatement

2010 Deloitte Global Services Limited

Risks of Material Misstatement

Loans are misstated because

Rights and obligations

Appropriate accounting treatment is assessed and

The transaction cannot be accounted for without the

Loans are misstated because

2010 Deloitte Global Services Limited

Exchange rates used by the banking system are

Risks of Material Misstatement

Valuation and allocation

Valuation and allocation

2010 Deloitte Global Services Limited

Rights and obligations

Securities and other financial assets are understated because:

Securities and other financial assets are misstated because:

Valuation and allocation

Securities and other financial assets are overstated because:

2010 Deloitte Global Services Limited

Entity periodically sends out custodian confirmation

Recorded deposits from financial institutions are understated because

Recorded deposits from financial institutions are understated because

Recorded deposits from financial institutions are misstated because:

2010 Deloitte Global Services Limited

Rights and obligations

Risks of Material Misstatement

Recorded deposits from financial institutions are misstated due to:

Valuation and allocation

Deposit from financial institutions are misstated due to:

2010 Deloitte Global Services Limited

Demand deposits are classified as term deposits or term deposits are

2010 Deloitte Global Services Limited

Risks of Material Misstatement

Recorded deposits from customers are understated because deposit

Recorded deposits from customers are misstated due to inaccuracies in

2010 Deloitte Global Services Limited

Valuation and allocation

Recorded deposits from customers are misstated due to:

Valuation and allocation

Deposit from customers are misstated due to:

Valuation and allocation

Customer deposits are recorded in the incorrect general ledger account

2010 Deloitte Global Services Limited

2010 Deloitte Global Services Limited

Risks of Material Misstatement

Other assets are misstated due to: