Assertions

Question 1

What are assertions?

Answer 1

claims mgmt makes in f/s

Question 2

Five assertions:

Answer 2

Existence

Completeness

Ownership

Valuation

Presentation

Question 3

Existence

Answer 3

• assets, liabilities, and equities actually exist
• that revenue/expense transactions actually occured as of a proper date
• there are cut-off condierations to existence
  
  • no transactiosn from the next period should be recorded at the statement date

When violated: results in overstatement. something has been recorded to the account that doesn’t exist.

Question 4

Completeness

Answer 4

Establish with evidence that all transactions and accounts that should be presented in the financial reports are actually included.

• no items belonging to the f/s have been missed
• there are cut-off considerations
  
  • all transactions from the period are actually recorded in the period

When violated: results in understatement. Something has not been recorded that should have been recorded.

Question 5

Ownership (rights and obligations)

Answer 5

Establish with evidence that amounts reported as assets of the company represent property rights (does the company have legal claim to control the assets?) and the amounts recorded as liabilities represent obligations

Question 6

Valuation (Measurement and Allocation)

Answer 6

Determine whether proper values have been assigned to assets, liabiltiies, equities, revenues, and expenses

Question 7

Presentation (Classification and Disclosure)

Answer 7

Determine whehter the accounting principles are properly selected and applied and whether disclosures are adequate