What Are Management Assertions?: Audit Financial Statements Auditors Assertions Audit Tests

What are Management Assertions?
Management assertions are claims made by members of management regarding certain aspects
of a business. The concept is primarily used in regard to the audit of a company's financial
statements , where the auditors rely upon a variety of assertions regarding the business. The
auditors test the validity of these assertions by conducting a number of audit tests. Management
assertions fall into the following three classifications.
Transaction-Level Assertions
The following five items are classified as assertions related to transactions, mostly in regard to
the income statement :
 Accuracy. The assertion is that the full amounts of all transactions were recorded, without error.
 Classification. The assertion is that all transactions have been recorded within the correct
accounts in the general ledger.
 Completeness. The assertion is that all business events to which the company was subjected
were recorded.
 Cutoff. The assertion is that all transactions were recorded within the correct reporting period .
 Occurrence. The assertion is that recorded business transactions actually took place.
Account Balance Assertions
The following four items are classified as assertions related to the ending balances in accounts,
and so relate primarily to the balance sheet :
 Completeness. The assertion is that all reported asset, liability , and equity balances have been
fully reported.
 Existence. The assertion is that all account balances exist for assets, liabilities, and equity.
 Rights and obligations. The assertion is that the entity has the rights to the assets it owns and is
obligated under its reported liabilities.
 Valuation. The assertion is that all asset, liability, and equity balances have been recorded at
their proper valuations.
Presentation and Disclosure Assertions
The following five items are classified as assertions related to the presentation of information
within the financial statements, as well as the accompanying disclosures:
 Accuracy. The assertion is that all information disclosed is in the correct amounts, and which
reflect their proper values.
 Completeness. The assertion is that all transactions that should be disclosed have been
disclosed.
 Occurrence. The assertion is that disclosed transactions have indeed occurred.
 Rights and obligations. The assertion is that disclosed rights and obligations actually relate to
the reporting entity.
 Understandability. The assertion is that the information included in the financial statements has
been appropriately presented and is clearly understandable.
There is a fair amount of duplication in the types of assertions across the three categories;
however, each assertion type is intended for a different aspect of the financial statements, with
the first set related to the income statement, the second set to the balance sheet, and the third set
to the accompanying disclosures.
If the auditor is unable to obtain a letter containing management assertions from the senior
management of a client, the auditor is unlikely to proceed with audit activities. One reason for
not proceeding with an audit is that the inability to obtain a management assertions letter could
be an indicator that management has engaged in fraud in producing the financial statements.
Existence or occurrence – Assets included in accounts exists

and events that give rise to transactions have taken place
• Rights and obligations- Entity has a legal claim on all assets
and revenues reported and has a legal responsibility for all
liabilities and expenses
• Completeness and cutoff - All transactions have been
recorded
• Valuation or allocation – Transactions are recorded at the
correct amount in the proper period
• Presentation and disclosure – All accounts are presented in
the appropriate place and all information required has been
disclosed in the statements and footnotes.

What Are Management Assertions?: Audit Financial Statements Auditors Assertions Audit Tests

Uploaded by

Copyright:

Available Formats

What Are Management Assertions?: Audit Financial Statements Auditors Assertions Audit Tests

Uploaded by

Document Information

Original Description:

Original Title

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

What Are Management Assertions?: Audit Financial Statements Auditors Assertions Audit Tests

Uploaded by

Copyright:

Available Formats

What are Management Assertions?

Account Balance Assertions

Presentation and Disclosure Assertions

 Occurrence. The assertion is that disclosed transactions have indeed occurred.

Existence or occurrence – Assets included in accounts exists

• Rights and obligations- Entity has a legal claim on all assets

and revenues reported and has a legal responsibility for all

liabilities and expenses

• Completeness and cutoff - All transactions have been

• Valuation or allocation – Transactions are recorded at the

correct amount in the proper period

• Presentation and disclosure – All accounts are presented in

the appropriate place and all information required has been

disclosed in the statements and footnotes.

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.