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Questions and Answers
What is the most efficient way to conduct audits?
What is the most efficient way to conduct audits?
What are the three categories of audit objectives?
What are the three categories of audit objectives?
What is the purpose of management assertions in the audit process?
What is the purpose of management assertions in the audit process?
How many categories of assertions are classified by international auditing standards (IASs) and U.S. GAAS?
How many categories of assertions are classified by international auditing standards (IASs) and U.S. GAAS?
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What is the primary concern of transaction related audit objectives?
What is the primary concern of transaction related audit objectives?
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What does the occurrence assertion address?
What does the occurrence assertion address?
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What is the opposite of the completeness assertion?
What is the opposite of the completeness assertion?
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What does the rights and obligations assertion address?
What does the rights and obligations assertion address?
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What is the result of a violation of the completeness assertion?
What is the result of a violation of the completeness assertion?
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What does the valuation and allocation assertion deal with?
What does the valuation and allocation assertion deal with?
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Study Notes
Conducting Audits
- The most efficient way to conduct audits is to obtain a combination of assurance for each class of transactions and for the ending balances in the related accounts.
Transaction Related Audit Objectives
- Several audit objectives must be met before the auditor can conclude that the transactions are properly recorded.
- These objectives are called transaction-related audit objectives.
Management Assertions
- Management assertions are implied or expressed representations by management about classes of transactions and the related accounts and disclosures in the financial statements.
- Assertions are directly related to the financial reporting framework (U.S. GAAP or IFRS) that forms the criteria for recording and disclosing accounting information in financial statements.
Categorization of Assertions
- International auditing standards (IASs) and U.S. GAAS classify assertions into three categories:
- Assertions about classes of transactions and events for the period under audit.
- Assertions about account balances at period end.
- Assertions about presentation and disclosure.
Assertions about Classes of Transactions
- Occurrence: Concerns whether recorded transactions actually occurred during the accounting period.
- Completeness: Addresses whether all transactions that should be included in the financial statements are in fact included.
- Accuracy: Addresses whether transactions have been recorded at correct amounts.
- Classification: Addresses whether transactions are recorded in the appropriate accounts.
- Cutoff: Addresses whether transactions are recorded in the proper accounting period.
Assertions about Account Balances
- Existence: Deals with whether assets, liabilities, and equity interests included in the balance sheet actually existed on the balance sheet date.
- Completeness: Addresses whether all accounts and amounts that should be presented in the financial statements are in fact included.
- Valuation and Allocation: Deals with whether assets, liabilities, and equity interests have been included in the financial statements at appropriate amounts.
- Rights and Obligations: Addresses whether assets are the rights of the entity and whether liabilities are the obligations of the entity at a given date.
Assertions about Presentation and Disclosure
- Occurrence and Rights and Obligations: Addresses whether disclosed events have occurred and pertain to the entity.
- Completeness: Deals with whether all required disclosures have been included in the financial statements.
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Description
Test your understanding of auditing principles, including occurrence, completeness, accuracy, classification, and cutoff. Learn how to ensure financial statements are accurate and reliable.
