chap 6 management assertions

Question 1

The PCAOB standards note that management implicitly or explicitly makes assertions regarding what 4 aspects of the various elements of the FSs and related disclosures?

Answer 1

1. recognition 2. measurement 3. presentation 4. disclosure

Question 2

the completeness assertion for presentation and disclosure deals with?

Answer 2

whether all required disclosures have been included int he FSs

Question 3

what are the AICPA assertions about classes of transactions and events?

Answer 3

1. occurence- transactions and events that have been recorded have occurred and pertain to the entity 2. completeness- all transactions and events that should have been recorded have been recorded 3. accuracy- amounts and other data relating to recorded transactions and events have been recorded properly 4. Classification- transacations and events have been recorded in the proper accounts 5. cutoff- transactions and events have been recorded in the correct accounting period

Question 4

manager assertions apply to which three areas

Answer 4

1. classes of transactions 2. account balances 3. presentation and disclosures

Question 5

what are management assertions?

Answer 5

are implied or expressed representations by management about classes of transactions and the related accounts and disclosures in the financial statements

Question 6

what is a relevant assertions?

Answer 6

they have a meaningful bearing on whether the account is fairly stated and are used to assess the risk of material misstatement and the design and performance of audit procedures ex. valuation is likely to be a relevant assertion for A/R but not for cash

Question 7

the classification assertion addresses?

Answer 7

whether transactions have been recorded in the appropriate accounts

Question 8

Assertions by management are directly related to what financial reporting frameworks?

Answer 8

GAAP and IFRS

Question 9

the occurrence and rights and obligations assertion for presentation and disclosure addresses what?

Answer 9

whether disclosed events have occurred and are the rights and obligation of the entity

Question 10

what are the AICPA assertions about account balances?

Answer 10

1. existence- assets, liabilities, and equity interests exist 2. completeness- all assets, liabilities, and equity interests that should have been recorded have been recorded 3. valuation and allocation- assets, liabilities, and equity interests are included in the FSs at appropriate amounts and any resulting valuation adjustments are appropriately recorded 4. rights and obligations- the entity holds or controls the rights to assets, and liabilities are the obligation of the entitiy

Question 11

the auditor should consider the ____ of each assertion for each significant class of transactions, account balance, and presentation and disclosure

Answer 11

relevance

Question 12

developing audit objectives for classes of transactions, account balances, and presentation and disclosure helps the auditor design what?

Answer 12

audit procedures to accumulate sufficient appropriate evidence about each aspect of the assertions

Question 13

the auditors audit objectives follow and are closely related to what?

Answer 13

management assertions

Question 14

what are the AICPA assertions about presentation and disclosure?

Answer 14

1. occurrence and rights and obligations- disclosed events and transactions have occurred and pertain to the entitiy 2. completeness- all disclosures that should have been dincluded in the FSs have been included 3. accuracy and valuation- financial and other info is disclosed appropriately and at appropriate amounts 4. classification and understandability- fianical and other info is appropriately presented and described and disclosures are clearly expressed

Question 15

what is the reason for using audit objectives?

Answer 15

to provide a framework to help the auditor accumulate sufficient appropriate evidence and decided the proper evidence to accumulate given the circumstances of the engagement

Question 16

the _____ remain the same from audit to audit, but the _____ varies depending on the circumstances

Answer 16

objectives evidence

Question 17

the accuracy assertion addresses ?

Answer 17

wqhether the transactions have been recorded at the right amounts

Question 18

T/F Management assertions exist for each asset, liability, owners equity, revenue, and expense item in the FSs

Answer 18

T

Question 19

the cutoff assertion addresses?

Answer 19

whether the transactions have been recorded in the proper accounting period

Question 20

the accuracy and valuation assertion for presentation and disclosure deals with?

Answer 20

whether financial info is disclosed fairly and at appropriate amounts

Question 21

after the relevant assertions ahve been identified, the audtor can develop what for each category of assertions?

Answer 21

audit objectives

Question 22

implied or expressed representations by management about classes of transactions and the related accounts and disclosures in the financial statements

Answer 22

management assertions

Question 23

International and AICPA auditing standards divide management assertions into what 3 categories?

Answer 23

1. assertions about classes of transactions and events for the period under audit 2. assertions about account balances at period end 3. assertions about presentation and disclosure

Question 24

T/F Auditors don’t need a thorough understanding of management assertions to perform quality audits

Answer 24

F

Question 25

the auditors primary responsibility in their audit objectives is to determine what?

Answer 25

whether managment assertions about FSs are justified

Question 26

What are the 5 categories of managment assertions accroding to the PCAOB?

Answer 26

1.Existence or occurrence- assets or liabilities of the public company exist at a given date, and recorded transactions have occurred during the period 2.Completeness- all transactions and accounts that should be presented in the FSs are so included 3. Valuation or allocation- assets, liability, equity, revenue, and expense components have been included in the FSs at appropriate amounts 4.Rights and obligations- the public company holds or controls rights to the assets, and liabilities are obligations of the company at the given date 5. Presentation and disclosure- the components of the FSs are properly classified, described, and disclosed

Question 27

GAAP and IFRS frameworks form the criteria that management uses to do what?

Answer 27

to record and disclose accounting information in financial statements.

Question 28

why have assertions iabout presentation and disclosure increased in importance?

Answer 28

transactions have become more complex requiring more expanded disclosures

Question 29

Management assertions lead to the what?

Answer 29

audit objectives

Question 30

in most cases management assertions are implied/expressed?

Answer 30

implied

Question 31

the classification and understandability assertion for presentation and disclosure relates to whether?

Answer 31

amounts are appropriately classified in the FSs and footnotes, and whether the balance descriptions and related dislosures are understandable