Assertions & procedures Flashcards
Existence
Do assets/ liab exist?
Balance sheet
Results in overstatement
Completeness
Have all entity’s assets,liab and equity been recoded?
Results in understatement
Rights and obligations
Does entity have legal claim or control of asset?
Are the liabilities the obligation of the entity?
Ie consignment inventory, assets pledged as security on debt, ar that has been sold
Valuation
Have assets, liab and equity been recoded at the correct amount?
Measurement of account ie for estimates: Allowance for AR, warranty accrual, amort accrual etc
Balance assertions
Existence
Completeness
Right/ obligations
Valuation
Transaction assertions
Occurrence Completeness Accuracy Cut off Classification
Occurrence
Have the revenues and expenses occurred?
Results in overstatement
Completeness (transaction)
Have entity’s revenues and expenses all been recorded?
Results in understatement
Accuracy
Have expenses and revenues been recorded accurately
Measurement
Cutoff
Have the expenses and revenues been recorded in correct period?
Classification
Have expenses and revenues been classified to appropriate accounts?
I/s accounts only - can’t be an expense s/b capital etc
Presentation assertions
Occurrence Rights and obligations Completeness Classification Understandability Accuracy Valuation
Types of procedures
Inspection Observation Inquiry External confirmation Recalculation Reperformance Analytical procedures
Cash procedures
Bank confirmation
count cash on hand
Confirm bank balance on bank stmt to latest bank rec
Review vs audit procedures
No inspection Less observation Few external confirmation No recalculation No reperforming Lots of inquiry Lots of analytical
