In representing that the financial statements are in accordance with the applicable financial reporting framework, management implicitly or explicitly makes assertions regarding the recognition, measurement, presentation and disclosure of the various elements of financial statements and related disclosures.
Assertions used by the auditor to consider the different types of potential misstatements that may occur fall into the following three categories and may take the following forms:
- Assertions about classes of transactions and events (Profit & Loss Account) for the period under audit:
i. Occurrence: Transactions and events that have been recorded have occurred and pertain to the entity.
ii. Completeness: All transactions and events that should have been recorded have been recorded.
iii. Accuracy: Amounts and other data relating to recorded transactions and events have been recorded appropriately.
iv. Cutoff: Transactions and events have been recorded in the correct accounting period.
v. Classification: Transactions and events have been recorded in the proper accounts.
- Assertions about account balances (Balance sheet) at the period end:
i. Existence: Assets, liabilities, and equity interests exist.
ii. Rights and obligations: The entity holds or controls the rights to assets, and liabilities are the obligations of the entity.
iii. Completeness: All assets, liabilities and equity interests that should have been recorded have been recorded.
iv. Valuation and allocation: Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded.
- Assertions about presentation and disclosure (Notes to the Accounts):
i. Occurrence and rights and obligations: Disclosed events, transactions, and other matters have occurred and pertain to the entity.
ii. Completeness: All disclosures that should have been included in the financial statements have been included.
iii. Classification and understandability: Financial information is appropriately presented and described, and disclosures are clearly expressed.
iv. Accuracy and valuation: Financial and other information are disclosed fairly and at appropriate amounts