MODULE 4 AUDITING MANAGEMENT ASSERTIONS CA SRIPRIYA KUMAR

MODULE 4 AUDITING MANAGEMENT ASSERTIONS CA. SRIPRIYA KUMAR Practical/ Article Training

LEARNING OBJECTIVES What is an Assertions applicable to transactions Assertions applicable to account balances Component wise Assertion Illustration 2

WHAT IS AN ASSERTION? An Intro.

ASSERTION DEFINED Financial statement assertions are attributes of financial statements that the preparer of financial statements is providing , “asserting” or stating to another party. 4

REPRESENTATIONS OF MANAGEMENT Assertions are representations of management that are embodied in all financial statement components or classifications 5

ASSERTIONS DRIVE AUDIT PROCEDURES Once we know what to test and what is expected of a financial statement component, we proceed to test the same through Audit procedures 6

Occurrence Completeness Cutoff Classification ASSERTIONS FOR CLASSES OF TRANSACTIONS AND EVENTS An Intro. Accuracy

TRUE AND FAIR Completeness Disclosure & Presentation Occurrence True & Fair Rights & Obligations Valuation Existence 8

CLASSES OF TRANSACTIONS AND EVENTS Occurrence • All transactions and events that have been recorded have occurred and pertain to the entity. • All transactions and events that should have been Completeness recorded have actually been recorded. Accuracy • Amounts and other data relating to recorded transactions and events have been recorded appropriately. Cutoff • Transactions and events have been recorded in the correct accounting period. Classification • Transactions and events have been recorded in the proper accounts. 9

ASSERTIONS FOR ACCOUNT BALANCES AT E OP • Assets, liabilities and equity interests exist. Existence Rights & Obligations • The entity holds or controls the rights to assets, and liabilities are the obligations of the entity. • Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts Valuation & and any resulting valuation or allocation Allocation adjustments are appropriately recorded. 10

ASSERTIONS FOR ACCOUNT BALANCES AT EOP Occurrenc Completenes Accurac e s y Fixed Assets Yes Valuation and allocation Yes Investments Yes Yes Inventories Yes Yes Yes Yes Yes Yes Receivables & Revenue Cash and Bank Loans and Advances Yes Yes Cut off Rights & Obligations Yes Share Capital Classification Existence Yes Borrowings Yes Expenses Liabilities Provisions Yes Yes 11

WHAT NEXT? WHAT DO I DO? I Know Assertions!