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The document discusses assertions and audit objectives. It defines assertions as declarations or positive statements made by management in financial statements regarding account balances, transactions, and disclosures. There are general implicit assertions that financial statements comply with accounting principles and specific explicit assertions regarding existence, completeness, occurrence, and valuation of assets and liabilities. The auditor's role is to evaluate whether financial statement assertions are appropriate and comply with accounting standards.
The document discusses assertions and audit objectives. It defines assertions as declarations or positive statements made by management in financial statements regarding account balances, transactions, and disclosures. There are general implicit assertions that financial statements comply with accounting principles and specific explicit assertions regarding existence, completeness, occurrence, and valuation of assets and liabilities. The auditor's role is to evaluate whether financial statement assertions are appropriate and comply with accounting standards.
The document discusses assertions and audit objectives. It defines assertions as declarations or positive statements made by management in financial statements regarding account balances, transactions, and disclosures. There are general implicit assertions that financial statements comply with accounting principles and specific explicit assertions regarding existence, completeness, occurrence, and valuation of assets and liabilities. The auditor's role is to evaluate whether financial statement assertions are appropriate and comply with accounting standards.
Outcome Covered: Know about the verification and valuation of assets and liabilities that should be observed in financial statements. Nature of Assertions
Financial statements are not statements of facts.
They are a collection of claims and assertions, made implicitly or explicitly by the entity’s management, about the recognition, measurement, presentation, and disclosure of information in the financial statements. Meaning of Assertions:
Management is responsible for the fair
presentation of financial statements. In representing that the financial statements are fairly presented in conformity with generally accepted accounting principles. An assertion is a declaration or a positive statement. In presenting their financial statements, Management makes implicit (General) or explicit (Specific) assertions relating to account balances at year end (account balances) about the information presented. Meaning of Assertions:
It is the auditor’s duty to conclude whether or not
the financial statements comply with assertions established according to generally accepted accounting principles. For example, 1. The expression “inventory at cost of OMR 1000 in a set of financial statements is in fact an assertion by management that, inventory actually exists, that it is owned by the entity at balance date, that it costs OMR 1000 and that is no other inventory. Financial statements are considered reliable if they are, in all material aspects, complete, valid and accurate. Meaning of Assertions:
By presenting the information of “Cash OMR.
25,000” in the financial statements, Management may be making the following assertions: A. The cash truly exists, and the company has the right to use it (existence). B. The amount presented represents all the company’s cash (Completeness). C. The amount presented is accurate (Accuracy). General assertions- Implicit General assertions arise where management asserts that the overall presentation and disclosure of financial statements: 1. Comply with the fundamental accounting concepts: A. Going concern B. Consistency C. Matching D. Prudency
2. Properly account for all material matters
3. Account for substance of Matters and not merely their legal form. 4. Financial statements are based on appropriate, generally accepted accounting their use, understanding and interpretation. General assertions- Implicit
5. Financial statements are adequately
informative about matters affecting their use, understanding and interpretation. 6. Financial statements are classified, summarized and presented in a reasonable manner 7. Correctly reflect the results of operations and financial position of the entity. 8. Comply with statutory requirements. Specific assertions-Explicit Specific assertions are explicit representations by management that the following critical audit objectives will be met with regard to individually disclosed assets, liabilities and transactions. 1. Existence 2. Right and obligations (ownership) 3. Occurrence (Validity) 4. Completeness (No unrecorded items) 5. Valuations 6. Measurement (Amount and period) Specific assertions-Explicit Assertions in financial information should be evaluated when performing substantive procedures and tests of control and at the evaluation and conclusion stage of the audit. Ordinarily, Audit evidence is obtained regarding each financial statement assertion. Levels of Assertions:
1. Financial statement level – Management
representation that the financial statements as a whole are presented fairly, in all material respects, in accordance with the applicable financial reporting framework For example, management asserts the financial statements are free from material misstatements. Levels of Assertions:
Account balance or class of transactions level –
Management representation that the underlying account balances and class of transactions, including related disclosures, are free of material misstatements For example, when considering the sales balance, management is asserting that sales revenue is complete (completeness assertion), the transactions occurred (occurrence assertion), and transactions have been appropriately recorded in the accounting records (accuracy assertion). Assertions May be relating to the way in which financial statements information is 1. Recognized 2. Measured 3. Presented 4. Disclosed Assertions about classes of transactions and events for the period under audit:
a. Occurrence – recorded transactions and events have
occurred and pertain to the entity b. Completeness – all transactions and events that should have been recorded have been recorded c. Accuracy – amounts and other data relating to recorded transactions and events have been recorded appropriately d. Cutoff (proper period) – transactions and events have been recorded in the correct accounting period e. Classification – transactions have been recorded in the proper accounts Assertions about account balances at the period end
a. Existence – assets, liabilities, and equity interests
exist b. Rights and obligations – the entity holds or controls the rights to assets, and liabilities are the obligations of the entity c. Completeness – all assets, liabilities and equity interests that should have been recorded have been recorded d. Valuation and allocation – assets, liabilities, and equity interests are included in the FS at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded Assertions about presentation and disclosure
a. Occurrence and rights and obligations – disclosed
events, transactions, and other matters have occurred and pertain to the entity b. Completeness – all disclosures that should have been included in the financial statements have been included c. Classification and understandability – financial information is appropriately presented and described, and disclosures are clearly expressed d. Accuracy and valuation – financial and other information are disclosed fairly and at appropriate amounts Major Influences that Shape Our Values are:
The Media/Internet: TV also affects our value it shows
viewers too often see people abusing and degrading other people without any significant consequences. Mainstream television, seen by a large number of young viewers, continues to feature a great deal of violence and antisocial behavior.
"The Language of Business: How Accounting Tells Your Story" "A Comprehensive Guide to Understanding, Interpreting, and Leveraging Financial Statements for Personal and Professional Success"