Audit Assertions

In: Business and Management

Submitted By cbsobes
Words 670
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Assertions may be classified into the following types: Assertions relating to classes of transactions | Assertions | Explanation | Examples: Salaries & Wages Cost | Occurrence | Transactions recognized in the financial statements have occurred and relate to the entity. | Salaries & wages expense has been incurred during the period in respect of the personnel employed by the entity. Salaries and wages expense does not include the payroll cost of any unauthorized personnel. | Completeness | All transactions that were supposed to be recorded have been recognized in the financial statements. | Salaries and wages cost in respect of all personnel have been fully accounted for. | Accuracy | Transactions have been recorded accurately at their appropriate amounts. | Salaries and wages cost has been calculated accurately. Any adjustments such as tax deduction at source have been correctly reconciled and accounted for. | Cut-off | Transactions have been recognized in the correct accounting periods. | Salaries and wages cost recognized during the period relates to the current accounting period. Any accrued and prepaid expenses have been accounted for correctly in the financial statements. | Classification | Transactions have been classified and presented fairly in the financial statements. | Salaries and wages cost has been fairly allocated between:
-Operating expenses incurred in production activities;
-General and administrative expenses; and
-Cost of personnel relating to any self-constructed assets other than inventory. |

Assertions relating to assets, liabilities and equity balances at the period end | Assertions | Explanation | Examples: Inventory balance | Existence | Assets, liabilities and equity balances exist at the period end. | Inventory recognized in the balance sheet exists at the period end. | Completeness | All assets,…...

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Audit Issue and Assertion

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...safeguarded 7-3 7-4 Controls over Financial Reporting Preventive Aimed at avoiding the occurrence of misstatements in the financial statements Example: Segregation of duties Detective Designed to discover misstatements after they have occurred Example: Monthly bank reconciliations Corrective Needed to remedy the situation uncovered by detective controls Example: Backups of master file Components of Internal Control The Control Environment Risk Assessment The Accounting Information and Communication System Control Activities Monitoring 7-5 7-6 Controls overlap Complementary – function together Redundant – address same assertion or control objective Compensating – reduces risk existing weakness will result in misstatement 1 Control Environment Factors Integrity and ethical values Commitment to competence Board of directors or audit committee Management philosophy and operating style Organizational structure Human resource policies and practices Assignment of authority and responsibility 7-7 Risk Assessment--Factors Indicative of Assessment--Factors Increased Financial Reporting Risk Changes in the regulatory or operating environment Changes in personnel Implementation of a new or modified information system Rapid growth of the organization Changes in technology affecting production processes or information systems Introduction of new lines of business, products, or processes 7-8 Control Activities Performance reviews Information......

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