Page 89 - CA Inter Bhaskar Vol 1

CA RAVI TAORI N Negative Assertion RISK ASSESSMENT AND INTERNAL CONTROL

AUDIT BHASKAR CH 03 - PART 01 Assertions For e.g. when entity writes, No contingent liability, it is directly

It means entity wants to say some financial items doesn't exist

They may be directly expressed or indirectly implied

expressed negative assertion, on the other hand if there is
no line item of “Building”, it is indirectly implied

Assertions refer to representations by management, explicit or otherwise, that are embodied in
the financial statements, as used by the auditor to consider the different types of potential
misstatements that may occur.

Use of Assertions
In representing that the financial statements are in accordance with the applicable financial
reporting framework, management implicitly or explicitly makes assertions regarding the
recognition, measurement, presentation and disclosure of the various elements of financial
statements and related disclosures.

Assertions used by the auditor to consider the different types of potential misstatements that
may occur fall into the following three categories.

Assertions about account balances at the period end:
Existence-assets, liabilities, and equity interests exist.
Completeness-all assets, liabilities and equity interests that should have been recorded
have been recorded.
Valuation and allocation-assets, liabilities, and equity interests are included in the
financial statements at appropriate amounts and any resulting valuation or allocation
adjustments are appropriately recorded.
Rights and obligations-the entity holds or controls the rights to assets, and liabilities
are the obligations of the entity.

Assertions about classes of transactions and events for the period under audit:
Occurrence-transactions and events that have been recorded have occurred and pertain
to the entity.
Completeness-all transactions and events that should have been recorded have been
recorded.
Accuracy-amounts and other data relating to recorded transactions and events have
been recorded appropriately.
Cut-off-transactions and events have been recorded in the correct accounting period.
Classification-transactions and events have been recorded in the proper accounts.

Assertions about presentation and disclosure:
Occurrence and rights and obligations-disclosed events, transactions, and other
matters have occurred and pertain to the entity.
Completeness-all disclosures that should have been included in the financial
statements have been included.

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