Definition
When management presents a balance, it implicitly claims it exists, is complete, belongs to the entity, is valued properly and is properly presented. AU-C 315, as amended by SAS 145, describes assertions in two groups, each including the related disclosures. For classes of transactions and events: occurrence, completeness, accuracy, cutoff, classification, and presentation. For account balances: existence, rights and obligations, completeness, accuracy, valuation and allocation, classification, and presentation. The auditor may use different wording if all of these are covered.
Why it matters in an audit or review
Assertions give structure to the work. Each procedure should address specific assertions, and the direction of testing matters: vouching addresses existence and occurrence, tracing addresses completeness. A procedure that does not name its assertion often tests the wrong thing. Peer reviewers look for a trail from risk, to assertion, to procedure.
Example
For inventory of $2.4 million (illustrative): the count addresses existence, the cost tests address valuation, the supplier invoice review and consignment inquiries address rights, and the roll-back and cutoff tests address completeness and cutoff. Each is listed in the program next to its assertion.
Common mistakes
- Testing existence and concluding on completeness.
- Using a generic list of assertions for all accounts.
- Not covering presentation and disclosure at all.
FAQ
Do assertions differ for balances and transactions?
Yes. Balances use existence and valuation; transactions use occurrence and cutoff.
Sources
- AICPA, AU-C Section 315, Identifying and Assessing the Risks of Material Misstatement (as amended by SAS 145), assertions
- AICPA, AU-C Section 500, Audit Evidence
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error