Audit assertions: match evidence direction to missing balances
Evidence about a recorded balance cannot automatically reveal an obligation missing from the records. The direction of the search matters: starting with the ledger and seeking support asks a different question from starting with an independent source and looking for an entry. A useful assertion map names the population, route, date and conclusion before assigning any coverage percentage.
This guide concerns a PCAOB issuer audit, using AS 1105 as displayed on October 25, 2026. The records are fictional. Ordinary investors usually lack the ledger, subsequent-payment population and underlying documents needed to execute these procedures for an actual issuer.
Map the five categories to separate questions
AS 1105 .07 and .11–.12 connects evidence relevance to the assertion, timing and direction of possible misstatement, and describes five assertion categories. The labels organize risks; they are not five interchangeable badges of correctness.
| Category | Payable-account question | Useful evidence direction |
|---|---|---|
| Existence or occurrence | Does the recorded obligation or transaction exist? | Recorded item toward underlying support |
| Completeness | Were obligations that should be included omitted? | Relevant external or originating source toward records |
| Rights and obligations | Is this the reporting entity’s obligation? | Contract and legal counterparty toward entity scope |
| Valuation or allocation | Is the amount appropriate? | Supported terms and measurement inputs toward recognized amount |
| Presentation and disclosure | Is it properly classified and described? | Underlying arrangement toward statement and note |
One invoice can inform several questions, but the evidence must actually address them. A genuine invoice for another group entity does not automatically establish an obligation of this entity. A correct nominal amount does not establish appropriate classification.
A signed audit opinion concerns financial statements in their stated scope; this article instead follows evidence for particular assertions. Do not substitute the opinion’s existence for a completed item-level test.
Work opposite routes through one account
All monetary values are hypothetical thousands. Recorded trade payables total 100 at year-end. In a ledger-to-document test, a recorded amount of 5 lacks adequate support. Initially label it unresolved; missing support alone does not prove the liability is nonexistent.
In a second test, start from a complete, relevant subsequent-payment list and inspect underlying facts about the reporting date. Assume this identifies a valid year-end obligation of 12 omitted from the payable ledger. The source item existed outside the original recorded population.
| Route | Starting population | Finding | Initial conclusion |
|---|---|---|---|
| Ledger to support | Recorded payables of 100 | Unsupported recorded amount 5 | Existence-related question remains open |
| Payment source to ledger | Relevant later payments and their underlying obligations | Year-end obligation 12 not recorded | Completeness error established under stated evidence |
Suppose further investigation proves that the 5 was a duplicate liability and that both the duplicate and the omitted 12 relate to this account without overlap. The corrected payable balance is 100 − 5 + 12 = 107.
The gross identified changes are 17, while the net balance change is 7. A final net increase of 7 does not mean the ledger contained only one error of 7. Nor does it establish a profit correction of 7; the associated entries, periods and accounts must be examined.
If the unsupported 5 is later supported instead, the corrected balance would be 112 under the otherwise unchanged facts. Keep that alternative separate from the confirmed-duplicate case. The conclusion changes because evidence changed, not because the investigator preferred a particular final total.
A complete check of recorded items can still miss the omission
Consider a separate case in which every recorded payable in the 100 population is supported without exception. That establishes no observed problem for the facts tested on recorded items. It cannot show that the omitted 12 is absent from the world.
An item that was never entered has no chance of selection from the recorded list. Increasing ledger coverage from 20% to 100% does not repair that missing starting population. Completeness requires a source capable of including the potentially omitted item.
A subsequent-payment population is only one possible source and needs its own completeness assessment. If management supplies only convenient payments, the reverse route can still miss obligations. Explain the source’s scope, including cash accounts, entities, dates and filters.
Also inspect whether a later payment settles a year-end obligation or a genuinely later purchase. A January payment is not automatically a December liability. Contracts, receipt of goods or services and the relevant recognition facts are needed.
Timing and origin can reverse the interpretation
Suppose a payment of 12 relates to services performed entirely in January with no year-end obligation under the stated facts. It should not be inserted into December payables merely because the payment appeared in the reverse test.
Conversely, an invoice received in January may provide evidence about December services already received. The document date and the underlying condition date need separate fields. A rule that includes every later invoice or excludes every later-dated document would fail in opposite directions.
The exercise is about matching evidence to recognition conditions, not a complete accounting rule for every contract. The applicable financial reporting framework determines which obligations belong at the reporting date. AS 1105 governs the evidence discipline rather than supplying the measurement rule for each liability.
Physical or documentary existence does not establish every assertion
A supplier statement may corroborate a balance while leaving unresolved whether the issuer or a different legal entity owes it. That is an obligation question, not something fixed by checking the same statement again.
Similarly, foreign-currency denomination, discounts, interest and other contract terms can affect measurement. Inspect the relevant terms and applicable basis; do not assume that matching an invoice’s printed number proves the recognized amount in the reporting currency.
Presentation needs another route. A genuine obligation could be classified in the wrong account or omit a relevant relationship or collateral description. Correct total liabilities do not make every note or classification correct.
These distinctions prevent a common overstatement: “the balance was confirmed, so all assertions passed.” Specify precisely what the procedure established and which questions remain.
Build an executable assertion file
| Field | Required record | Failure it exposes |
|---|---|---|
| Assertion | Exact question and error direction | Evidence used for the wrong risk |
| Population | Source, total, extraction and filters | Omitted items excluded before testing |
| Route | Starting item and intended destination | Ledger tracing mislabeled as completeness |
| Date | Document, condition and reporting date | Later activity assigned to wrong period |
| Identity | Entity, counterparty and contract | Real transaction assigned to wrong obligor |
| Result | Supported, contradicted or unresolved | Missing evidence called a proved error |
| Adjustment | Entry and effect by account and period | Net balance mistaken for net profit |
AS 1105 .15–.21 and .29 provides context for evidence procedures and resolving inconsistent information. Inspection, observation, inquiry and recalculation do not have identical relevance or reliability in every circumstance.
Public annual reports may disclose accounting policies, obligations, litigation or an auditor’s described procedures. They rarely expose the complete source populations. A public researcher can map claims and missing evidence without presenting a fictional reverse search as an audit actually performed.
When documents conflict, preserve the versions, identify which assertion is affected and investigate reliability, scope and timing. Do not choose whichever source makes the ledger agree. A second document from the same unverified source is not automatically independent corroboration.
Update the file when an unsupported entry is resolved, an omitted obligation is established, entity scope changes or new information contradicts the prior evidence. The deliverable should show the route from source to conclusion and the limits of that route, not a universal confirmation rate.
Separate coverage of money from coverage of risks
For the original ledger of 100, reviewing the recorded 5 represents 5% of recorded monetary value, assuming no overlap. It says nothing about the percentage of unrecorded obligations examined. The independently found 12 cannot be placed inside that original denominator merely to claim that 17% of the ledger was tested.
Keep a source-population reconciliation alongside the assertion map. If the payment export totals 80 but bank disbursement records show 95 for the same accounts and dates, explain the remaining 15 before claiming the reverse search covered all relevant payments. The difference might be legitimate transfers outside the test, a filter error or omitted suppliers. Its explanation changes the eligible starting population, not just the final percentage.
FAQ
Can checking every recorded payable establish completeness?
Not by itself. An omitted obligation is outside that recorded population.
Is an unsupported amount automatically a nonexistent liability?
No. It remains unresolved until appropriate evidence establishes the facts.