Week 7 - Assertions When Looking at Statement of Financial Position - Balances at the Period End

Question 1

What are the five assertions when looking at statement of financial position

Answer 1

Completeness
Rights and Obligations
Allocation
Valuation
Existence

Question 2

What is the word to remember these assertions?

Answer 2

CRAVE

Question 3

Completeness

Answer 3

How do we know if every asset they say they have is there?
- having look at analytical review - look at assets from last year and compare to this year - enquire if any difference

Question 4

Rights and Obligations

Answer 4

Do they own it or is it leased? Finance lease vs operating lease

Question 5

Existence

Answer 5

Assets had to and be physically verified someone

Question 6

What is completeness especially a risk for?

Answer 6

Liabilities - want to look like they are performing better so liabilities more likely to be forgotten about or misclassified - more likely if company close to breaking debt covenants