Financial Statements Assertions
Financial statements assertions are the representations by management, explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur.
Auditors use the financial statements assertions to assess the risk of material misstatements and designing and performing audit procedures to form audit opinion.
- Assertions for Classes of transactions (statement of profit & loss)
- Assertions for account balances at period end (statement of financial position – balance sheet)
- Assertions for presentation and disclosure
Assertions About Classes Of Transactions And Events For The Period Under Audit;
- Occurrence: transactions and events that have been recorded have occurred and pertain to the entity.
- Completeness: all transactions and events that should have been recorded have been recorded.
- Accuracy: amounts and other data relating to recorded transactions and events have been recorded appropriately.
- Cut-off: transactions and events have been recorded in the correct accounting period.
- Classification: transactions and events have been recorded in the proper accounts.
Assertions About Account Balances At The Period-End;
- Existence: assets, liabilities, and equity interests exist.
- Rights and obligations: the entity holds or controls the rights to assets, and liabilities are the obligations of the entity.
- Completeness: all assets, liabilities and equity interests that should have been recorded have been recorded.
- Valuation: Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation is appropriately recorded.
- Allocation: Assets liabilities and equity interests are recorded in the correct class of account.
Assertions About Presentation And Disclosure;
- Occurrence and rights and obligations: disclosed events, transactions and other matters have occurred and pertain to the entity.
- Completeness: all disclosures that should have been included in the financial statements have been included.
- Classification and understandability: financial information is appropriately presented and described, and disclosures are clearly expressed.
- Accuracy and valuation: financial and other information are disclosed fairly and in appropriate amounts.