Auditing Management Assertions.

Management assertions are claims by management about the accuracy of the financial statements. For example, if management states in the balance sheet that it has receivables worth $4500, then its claims by the managers that those are the true and accurate figures. As earlier noted, it is the responsibility of managers to present financial statements that are true and fair.

Auditors use management assertions to help guide audit evidence gathered. These assertions are classified below:

1. Transaction assertions: The following are classified as assertions related to transactions (mostly affecting the income statement).

• Occurrence. This claims that the business transactions available in the statements actually took place.
• Cut-off. The assertion is that all transactions were recorded within the correct reporting period.
• Completeness. The transactions that require recording have been recorded.
• Classification. The transactions have been recorded in their respective accounts.
• Accuracy. The assertion is that all transactions have been recorded with the correct figures.

     2. Account balance assertions: The following assertions relate to the ending  balances in                  accounts (mostly the balance sheet).

• Existence. The assertion is that all the assets, liabilities and equity balances actually do exist.
• Valuation and allocation. All assets, liabilities and equity have been valued properly.
• Completeness. The assertion is all the assets, liabilities and equity have been recorded.
• Rights and obligations. The business has right to assets it owns and the liabilities with in the statements are its obligations.

     3. Presentation and disclosure assertions: These assertions deal with the presentation   of information within the financial statements as well as the accompanying disclosures. 

• Accuracy and valuation. The information recorded is correct.
• Occurrence. The transactions actually did take place.
• Completeness. All events have been recorded.
• Rights and obligations. The business organisation has right to the assets it owns and the liabilities within the statements are its obligations.
• Classification and understandability. The financial information presented in the statements is clear and understandable.

The table below summarizes the assertions:

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