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Transaction Errors and

Management Assertions

What is Relationship of Error
Types and Management
Assertions?

Only 6 Fundamental Transaction Errors Recorded but not real Real but not recorded Wrong amount Wrong account Wrong period Not authorized .

Liability owed by entity) Presentation & Disclosure (Financial statement and related notes) . Management Assertions Existence/Occurrence (Valid or Real Transactions) Completeness (Have not missed any transactions) Valuation (Correct amount or reasonable estimation. Rights/Obligation/Ownership (Assets owned by entity.

different types of errors and strengthen the related management assertions .Relationship between Management Assertion & Transaction Errors Management assertions state (assert) that financial statements do not include the any of these six types of errors A matter of mapping errors to assertions Remember: We make our Control Risk Assessment on the Mgt Assertions – So if we have a lot of errors of a particular type. the control risk assessment on the related mgt assertion increases – We try to find controls that do the best at preventing. detecting.

Mapping Error Types to Management Assertions – Error Types – Management Assertions Recorded but not real Existence/Occurrence Real but not recorded Completeness Wrong amount Valuation Wrong account Rights/Obligation/Owners hip Wrong period Presentation & Disclosure Not authorized .

Control Objectives Complicate the Mapping Control Objectives are used by internal auditors. external auditors as a middle or intermediate mapping point – Specific controls are tied to control objectives – Could we map controls directly to management assertions? (That would simplify internal control evaluation) Many different versions of control objective lists and names. – Vary by firm. professional organization .

Control Objectives are an intermediate mapping between Error Types and Mgt Assertions Adds complexity and some confusion Error Management Types Assertions Control Objectives .