The formulas
- Coverage = disbursements examined / total disbursements searched
- Found as % of PM = unrecorded liabilities found / performance materiality
- Indicated in unexamined = found / examined x unexamined
How it works
The search for unrecorded liabilities examines payments made after period end, and invoices received but not yet paid, for obligations that existed at the balance sheet date. Most searches examine every disbursement above a threshold, which gives high dollar coverage with few items.
Unrecorded liabilities found are factual misstatements. A high rate of findings, or findings close to performance materiality, says the completeness controls failed and the search should be extended in time or lowered in threshold.
Illustrative figures only. Check the result against your firm's methodology before relying on it.
Common questions
How long should the subsequent period be?
Through the date of fieldwork completion is common practice, with longer windows for entities that pay slowly.
Does the indicated amount count as a projected misstatement?
Only if the examined items were a sample. Items above a threshold are tested 100%, not sampled, so the rate does not project to smaller items.
What else should be searched?
Unpaid invoices, receiving reports without invoices, and accrual lists from operations staff.
Formulas on this page are the standard definitions.
Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.