MANAGEMENT ASSERTIONS

Audit relationship: Management asserts, CPA attests.

To attest to what management says, the auditor has to know what was said.

Anytime, management issues financial statements, it makes implicit assertions in three categories:

• Transactions and events for the period under audit.• Account balances at period end.• Presentation and Disclosure.

ASSERTIONS (4) ABOUT ACCOUNT BALANCES AT THE END OF THE PERIOD

Are account balances fairly-stated?

These determine if the current account balances are properly valued.

Existence = items really exist.Rights and obligations = the entity has the right to receive the

benefits from the item or has the obligation to satisfy claims.

Completeness = all items which should be listed are.Valuation and allocation = all items are properly valued.

ASSERTIONS (4) ABOUT PRESENTATION AND DISCLOSURE

Are financial statements complete and transparent?

These determine that financial statements properly report economic activity.

Occurrence and rights and obligations = items listed on the financial statements represent historical events that belong to the entity.

Completeness = everything that should be on the financial statements (including disclosure) is included.

Classification and understandability = items in the financial statements are properly described in a clear fashion.

Accuracy and valuation = items listed on the financial statements are properly valued without error.

ASSERTIONS (5) ABOUT TRANSACTIONS AND EVENTS FOR THE PERIOD

Are transactions being properly recorded?

This is the entry point into the accounting records.

Occurrence = the events really happened.Completeness = all the events that should be included are.Accuracy = the events are recorded without error.Cutoff = the events belong in this time period.Classification = the events belong in this account.