a Flashcards
What are management assertions in the context of financial statements?
Attributes or qualities that we expect revenues, costs, assets, and liabilities in the financial statements to have
For example, we expect the cash balance to exist.
Why are they called assertions?
Because those charged with governance have prepared the financial statements and are asserting certain things about them.
What are the three types of assertions?
- Transactions and events for the period under audit
- Account balances at the period end
- Presentation and disclosure in the financial statements
What is the assertion related to whether a transaction should be in the accounts?
Occurrence
What is the assertion that relates to the cash balance’s existence?
Existence
What assertion checks if the financial statement amounts are accurate?
Accuracy
What assertion assesses whether all relevant items are included in the financial statements?
Completeness
What assertion evaluates if disclosures are appropriate?
Classification
What do auditors need to use assertions for?
To assess risks of material misstatement and design further audit procedures.
What does sufficient evidence imply?
Quantity, but quality is more important.
What does appropriate evidence mean?
Relevant and reliable.
What type of evidence is considered more reliable?
Independent evidence
What type of evidence is less reliable?
Oral evidence
List the eight ways to collect audit evidence.
- Inspection of records or documents
- Inspection of tangible assets
- Observation
- Enquiry
- Confirmation
- Recalculation
- Reperformance
- Analytical Procedures
What are substantive tests primarily based on?
One or more of the procedures for gathering evidence.
Fill in the blank: Auditors gather sufficient and appropriate evidence to reduce the risk of the assertions being _______.
wrong
