According to PSA 315, Assertion refers to the representations by management,
explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur.
Transaction-level assertions. The following five items are classified as
assertions related to transactions, mostly in regard to the income statement:
ASSERTIONS DEFINITIONS EXAMPLES
Accuracy The full amounts of all The correct and total transactions were amount of the supplies recorded without error. purchased has been recorded. Classification All transactions have The supplies used and been recorded within the purchased have been correct accounts in the fairly allocated in general ledger. prepaid supplies and supplies expense. Completeness All business events to All the supplies used which the company was and purchased have subjected were been fully accounted for. recorded. Cutoff All transactions were All the supplies used recorded within the have been taken off correct reporting period. correctly in the prepaid supplies at the end of the period. Occurrence Transactions recognized Recording acquisition of in the financial supplies that actually statements have took place. occurred.
Account balance assertions. The following four items are classified as
assertions related to the ending balances in accounts, and so relate primarily to the balance sheet:
ASSERTIONS DEFINITIONS EXAMPLES
Completeness All reported asset, All equipment liability, and equity recognized in the balances have been fully balance sheet exists at reported. the period end. Existence All account balances All equipment units that exist for assets, should have been liabilities, and equity recorded have been recognized in the financial statements. Rights and obligations The entity has the rights Audit entity owns or to the assets it owns and controls the equipment is obligated under its recognized in the reported liabilities. financial statements. Valuation All asset, liability, and All the equipment have equity balances have been recorded at its been recorded at their proper depreciated cost. proper valuations.
Presentation and disclosure assertions. The following five items are classified as assertions related to the presentation of information within the financial statements, as well as the accompanying disclosures:
ASSERTIONS DEFINITIONS EXAMPLES
Accuracy All information disclosed Related party is in the correct transactions, balances amounts, and which and events have been reflect their proper disclosed accurately at values. their appropriate amounts. Completeness All transactions that All related parties, should be disclosed related party have been disclosed. transactions and balances that should have been disclosed have been disclosed in the notes of financial statements. Occurrence All disclosed Transactions with transactions have indeed related parties disclosed occurred. in the notes of financial statements have occurred during the period. Understandability All the information The nature of related included in the financial party transactions, statements has been balances and events appropriately presented has been clearly and is clearly disclosed in the notes of understandable. financial statements. References: http://www.aasc.org.ph/downloads/PSA/publications/PDFs/PSA-315-Redrafted.pdf https://accounting-simplified.com/audit/introduction/audit-assertions.html https://www.accountingtools.com/articles/what-are-management-assertions-in- auditing.html