Ch. 13 Assertions

Question 1

What are the assertions for account balances?

Answer 1

• Existence - do the assets, liabilities, and equity exist? (Overstatement)
• Rights and Obligations - Does the entity have a legal claim or obligation?
• Completeness - Have all the entity’s assets, liabilities, and equity been recorded (Understatement)
• Accuracy, valuation, and allocation - Have all the assets, liabilities, and equity been included in the correct amount (measurement of accounts - estimates or calculations)
• Classification - assets, liabilities, and equity recorded in proper amounts (BS items only)
• Presentation - have assets, liabilities, and equity been appropriately aggregated or disaggregated, have disclosures been made?

Question 2

What are the assertions for income statements?

Answer 2

• Occurrence - has the revenue and expense occured? (overstastement)
• Completeness - Have all the transactions been recorded? (understatement)
• Accuracy - have the amounts been recorded accurately (measurement)
• Cut-off - has the entity’s revenue and expenses been recorded in the correct period?
• Classification - Has the revenues and expenses been recorded to the appropriate accounts (within the income stastement)
• Presentation - have the revenues and expenses appropartely aggregated/disaggregated, have the approriate disclosured been made?

Question 3

Types of questions that relate to assertions:

1) Procedures and Assertions for accounts

Answer 3

How to address:

1) Identify Account
2) discuss specific case related risk
3) Account and assertion
4) Procedures to address the assertion risk