Audit Assertions

Assertions
•
ISA 315 (revised) presents the assertions in two categories as follows (See Note
below)
• assertions about classes of transactions and events, and related disclosures
for the period under audit
• assertions about account balances and related disclosures at the period end.
Assertions about classes of transactions and events and related
disclosures
(i) Occurrence – transactions about events that have been recorded or disclosed,
have occurred, and such transactions and events pertain to the entity.
(ii) Completeness – all transactions and events that should have been recorded
have been recorded, and all related disclosures which should have been included in
the financial statements, have been included.
(iii) Accuracy – amounts and other data relating to recorded transactions and
events have been recorded appropriately, and related disclosures have been
appropriately measured and described.
(iv) Cut-off– transactions and events have been recorded in the correct accounting
period.
(v) Classification – transactions and events have been recorded in the proper
accounts.
(vi) Presentation– transactions and events are appropriately aggregated or
disaggregated and clearly described, and related disclosures are relevant and
understandable in the context of the requirements of the applicable financial
reporting framework.
Assertions about account balances, and related disclosures, at the
period end
(i) Existence – assets, liabilities and equity interests exist.
(ii) Rights and obligations – the entity holds or controls the rights to
assets, and liabilities are the obligations of the entity.
(iii) Completeness – all assets, liabilities and equity interests that
should have been recorded, and all related disclosures that should
have been included in the financial statements, have been included.
(iv) Accuracy, valuation and allocation – assets, liabilities and equity
interests have been included in the financial statements at
appropriate amounts and any resulting valuation or allocation
adjustments have been appropriately recorded, and related
disclosures have been appropriately measured and described.
Assertions about account balances, and related disclosures, at the
period end
(v) Classification – assets, liabilities and equity interests have been
recorded in the proper accounts.
(vi) Presentation–assets, liabilities and equity interests are
appropriately aggregated or disaggregated and clearly described, and
related disclosures are relevant and understandable in the context of
the requirements of the applicable financial reporting framework.

Whilst every assertion should be considered for audit, the auditor will obviously
direct his attention to those assertions which present a risk of material
misstatement which, if not detected, could lead the auditor to express an
inappropriate opinion on the financial statements
Example 1
When the auditor gathers evidence about sales transactions, he will
be seeking evidence to support the following assertions:
occurrence - all sales included are genuine sales (not fictitious) of the
entity (a genuine sale of the company’s goods/services has occurred)
completeness -all sales which were made, have been included in the
total of sales made for the year
accuracy – all sales have been recorded appropriately : this implies
prices are correct and that the correct discount and VAT rates have
been used and correctly calculated.
cut-off – all sales recorded, occurred in the accounting period being
audited
Example 1 [continued]

cut-off – all sales recorded, occurred in the accounting period being

audited
classification – all sales have been posted to (recorded in) the proper
account. This implies that a credit sale has been posted to the correct
debtor’s account and that VAT has also been correctly posted.
presentation – the sales transactions have been presented in terms of
the disclosure requirements of the relevant financial reporting
standard.
Example 2
Relevant assertions for PPE:
existence - all plant and equipment included in the balance, existed at
reporting date
completeness - all plant and equipment owned by the company, is
included in the balance reflected in the financial statements
accuracy valuation and allocation - the plant and equipment has
been reflected in the statement of financial position at appropriate
amounts; and that reasonable adjustments have been made for
depreciation, impairment and/or obsolescence.
rights - the company has (holds or controls) the right of ownership to
the plant and equipment reflected in the statement of financial
position (any encumbrances on that ownership must be disclosed).
Example 2 [contd]
presentation – plant and equipment has been appropriately
aggregated/disaggregated and clearly described, e.g. plant and
equipment has been presented in the statement of financial position
aggregated with land and buildings as a separate line item under non-
current assets as property, plant and equipment and has been
disaggregated in the property, plant and equipment disclosure notes
into plant and machinery, fixtures and fittings and tools and
equipment.

Disclosure is far more comprehensive and complex for plant and equipment than
for sales (example 1) and obviously presents more risk that there will be material
misstatement in the disclosures. The auditor must satisfy himself that the related
disclosures are accurately measured and described, complete as well as relevant
and understandable in terms of the applicable financial reporting framework.
Study Outcomes
• briefly explain the difference between general and
application controls;
• name the benefits of IT controls;
• discuss the relevance of manual controls in an IT
environment;