Summary of Management Assertions by Category
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. • Authorization—all transactions and events have been properly authorized.* • 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. 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 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: • 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 at appropriate amounts.
*International and AICPA auditing standards consider Authorization to be a subset of the Occurrence assertion and thus do not list it separately. We list Authorization as a separate assertion about classes of transactions and events for instructional clarity.
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12 Part 1 Introduction to Assurance and Financial Statement Auditing
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We hope the analogy of house inspectors and auditors as assurance providers has helped you understand the basic intuition behind the necessary characteristics of auditors and audit- ing and why auditing is in demand, even when it is not required by law. We will refer back to this analogy occasionally throughout the book to remind you of this basic intuition. As you study this book, we encourage you to keep in mind how the concepts you are learning relate to important characteristics of auditors and home inspectors and the services they offer. Keep the big picture in mind!\