Financial statement assertions

Question 1

What is meant by assertions?

Answer 1

Assertions representing that the financial statements are prepared in accordance with the applicable financial reporting framework. Assertions are used by the auditor to consider the different types of potential misstatements that may occur when identifying, assessing and responding to the risks of material misstatement

Question 2

P&L Assertion - Occurrence definition?

Answer 2

Transactions and events that have been recorded or disclosed have occurred and pertain to the entity (in that accounting period)

Question 3

P&L Assertion - Completeness definition?

Answer 3

All transactions and events that should have been recorded have been recorded and all related disclosures that should have been included in the financial statements have been included

Question 4

P&L Assertion - Cut-off definition?

Answer 4

To ensure transactions and events have been recorded in the correct accounting period

Question 5

P&L Assertion - Classification definition?

Answer 5

Transactions and events have been recorded in the proper accounts (i.e. cost of sales)

Question 6

P&L Assertion - Accuracy definition?

Answer 6

Amounts and other data relating to the recorded transactions and events have been recorded appropriately, and related disclosures have been appropriately measured and described

Question 7

P&L Assertion - Presentation definition?

Answer 7

Transactions and events are appropriately aggregated or disaggregated and are clearly described, and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework

Question 8

SOFP Assertion - Completeness definition?

Answer 8

All assets, liabilities, and equity interests that should have been recorded have been recorded and all related disclosures that should have been included in the financial statements have been included

Question 9

SOFP Assertion - Obligations and rights definition?

Answer 9

The entity holds or controls the rights to assets, and liabilities are the obligations of the entity

Question 10

SOFP Assertion - Valuation definition?

Answer 10

All assets, liabilities and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded, and related disclosures have been appropriately measured and described (inventory, receivables and PPE)

Question 11

SOFP Assertion - Existence definition?

Answer 11

Assets, liabilities and equity interests exist (non current assets)

Question 12

SOFP Assertion - Classification definition?

Answer 12

Assets, liabilities and equity interests have been included in the proper accounts (i.e. current and non current assets)

Question 13

SOFP Assertion - Presentation definition?

Answer 13

Assets, liabilities and equity instruments are appropriately aggregated or disaggregated and are clearly described, and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework

Question 14

What is meant by management’s expert?

Answer 14

An individual or organisation possessing expertise in a field other than auditing or accounting, whose work is used by the entity to assist in the preparation of the financial statements