MODULE 4
AUDITING MANAGEMENT ASSERTIONS
CA. SRIPRIYA KUMAR
Practical/ Article Training
LEARNING OBJECTIVES
What is an
Assertion
Assertions
applicable to
transactions
Assertions
applicable to
account
balances
Component
wise Assertion
Illustration
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WHAT IS AN ASSERTION?
An Intro.
ASSERTION DEFINED
Financial statement assertions are attributes
of financial statements that the preparer of
financial statements is providing ,“asserting”
or stating to another party.
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REPRESENTATIONS OF MANAGEMENT
Assertions are representations of management
that are embodied in all financial statement
components or classifications
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ASSERTIONS DRIVE AUDIT PROCEDURES
Once we know
what to test and
what is expected of
a financial
statement
component, we
proceed to test the
same through
Audit procedures
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Occurrence
Completeness
Cutoff
Accuracy
Classification
ASSERTIONS FOR CLASSES OF
TRANSACTIONS AND EVENTS
An Intro.
TRUE AND FAIR
Completeness
Disclosure &
Presentation
Occurrence
True
& Fair
Rights &
Obligations
Valuation
Existence
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CLASSES OF TRANSACTIONS AND EVENTS
Occurrence
Completeness
•All transactions and events that have been recorded have
occurred and pertain to the entity.
•All transactions and events that should have been
recorded have actually been recorded.
Accuracy
•Amounts and other data relating to recorded transactions
and events have been recorded appropriately.
Cutoff
•Transactions and events have been recorded in the correct
accounting period.
Classification
•Transactions and events have been recorded in the proper
accounts.
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ASSERTIONS FOR ACCOUNT BALANCES AT
EOP
• Assets, liabilities and equity interests exist.
Existence
Rights &
Obligations
• The entity holds or controls the rights to assets, and
liabilities are the obligations of the entity.
• Assets, liabilities, and equity interests are included
Valuation
in the financial statements at appropriate amounts
&
and any resulting valuation or allocation
Allocation
adjustments are appropriately recorded.
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ASSERTIONS FOR ACCOUNT BALANCES AT EOP
Occurrenc Completenes Accurac
e
s
y
Fixed Assets
Yes
Yes
Yes
Yes
Valuation
and
allocation
Yes
Investments
Yes
Yes
Yes
Yes
Yes
Inventories
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Receivables
& Revenue
Cash and
Bank
Loans and
Advances
Yes
Yes
Share Capital
Yes
Classification Existence
Rights &
Obligations
Yes
Yes
Yes
Yes
Cut
off
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Borrowings
Yes
Yes
Yes
Yes
Expenses
Liabilities
Provisions
Yes
Yes
Yes
Yes
Yes
Yes
Yes
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WHAT NEXT? WHAT DO I DO?
I Know Assertions!