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Management Assertions and Audit Objectives

auditing and assurance

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Andres Arce
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47 views

Management Assertions and Audit Objectives

auditing and assurance

Uploaded by

Andres Arce
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Management Assertions

Implied or expressed representations by management:

1. About classes of transactions and the related accounts and disclosures in


the financial statements

2. Directly related to accounting standards


3.they are part of the criteria that management uses to record and
disclose accounting information in financial statements

4. Assertions apply to 1) classes of transactions, 2) account balances, and 3)


presentation of, and disclosures in, the financial statements.

5. Examples are:
o Expenses recorded in the income statement actually occurred
o All the inventory items that should be recorded are included in the inventory
account balance
o Breakdown of property plant & equipment is properly shown in the note to the
1
Copyright © 2017 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488609138 / Arens / Auditing Assurance Services and Ethics in
financial statements. Australia, 10Ed
Management Assertions about classes
of transactions and events
Occurrence • Transaction actually
occurred.
Completeness • Transactions completely
rerecorded
Accuracy • Transaction recorded
accurately
Classification • Transactions recorded in
the proper accounts
Cut-off • Transaction recorded in the
correct accounting period
Management Assertions about
accounts balance

• Assets, liabilities and


Existence equity included in the
balance sheet are actually
existed.
• All accounts in fact
Completeness
included.
Valuation and • Assets, liabilities, equity
allocation accounts included in BS at
appropriate amounts
Rights and • Assets are rights and
obligations liabilities are obligations.
Management Assertions about
disclosures
Occurrence and • Disclosed events has
rights and
occurred and are the
obligations
rights and obligation of
• the entity information
All required
Completeness
have been included in the
FS
Accuracy and • Financial information is
Valuation disclosed at appropriate
amounts.
Classification and • Amounts are appropriately
understandability classified in the FS and
balance descriptions and
related disclosures are
understandable
Audit objectives
Presentation
and
Balance disclosure-
related related
Transaction- audit audit
related objectives objectives
audit
objectives

Specific General
Auditor’s Transaction-Related Audit
Objectives
1. Occurrence – recorded transactions did occur, i.e. they are valid

2. Completeness – all valid transactions are recorded

3. Accuracy – recorded transactions are stated at correct amounts

4. Posting and summarisation – recorded transactions are properly included


in the master files and are correctly summarised

5. Classification – recorded transactions are properly classified, i.e. in the


correct accounts
6
Copyright © 2017 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488609138 / Arens / Auditing Assurance Services and Ethics in
Australia, 10Ed
Relationships Among Management
Assertions and Transaction-Related Audit
Objectives

7
Copyright © 2017 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488609138 / Arens / Auditing Assurance Services and Ethics in
Australia, 10Ed
Auditor’s Balance-related Audit Objectives
These objectives apply to account balances as opposed to classes of
transactions:

Existence - amounts included in account balances exist

Completeness – all amounts that should be included in account balances, are


included

Accuracy – amounts included in account balances are stated at the correct


amounts

Classification – amounts included in the account are correctly classified

Cutoff – transactions before/after balance date are recorded in the correct period
8
Copyright © 2017 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488609138 / Arens / Auditing Assurance Services and Ethics in
Australia, 10Ed
Relationships Among Management
Assertions and Balance-Related Audit
Objectives

Copyright © 2017 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488609138 / Arens / Auditing Assurance Services and Ethics in
Australia, 10Ed
Auditor’s Presentation and Disclosure Audit
Objectives
These objectives apply to the presentation of, and notes in, the financial
statements:

1. Occurrence and rights and obligations - disclosed events have occurred


and are the rights (assets) and obligations (liabilities) of the entity.

2. Completeness - all required disclosures have been included.

3. Accuracy and valuation - financial information is disclosed fairly and at


appropriate amounts.

4. Classification and understandability - amounts are appropriately classified.

10
Copyright © 2017 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488609138 / Arens / Auditing Assurance Services and Ethics in
Australia, 10Ed
Relationships among Management Assertions
and Presentation & Disclosure–related Audit
Objectives

11
Copyright © 2017 Pearson Australia (a division of Pearson Australia Group Pty Ltd) – 9781488609138 / Arens / Auditing Assurance Services and Ethics in
Australia, 10Ed

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