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Audit term
03-02-2010, 06:03 PM,
Audit term
Dear i m very much confused by a term in Audit
i Recently started my subject of Auditing in PIPFA Final and i m very much disturbed by the term "Assertion level"

whenever i personally study any of the book such as "Practical Auditing" and similarly the summary Issued by different websites and so on. normally this word confuses me a lot. i don't know what is this "Assertion level"
this words normally used by many books and i have faced this problem seriously in ISA-330 Auditor's procedure in response to assessed risk.

would u guys please explain its meaning in a simple manner which a beginner can understand with example
shall be thankful.

03-02-2010, 09:00 PM,
There are numbers of headings in the financial statements, eg Revenue, expenditure, non-current assets, inventories, payables etc
For each of these items in the financial statements, the management is making assertions
Assertions like the factory is owned by the company, the company has an obligation to pay debt, has a right towards recievable, the expenses occured during the year etc etc
Therefore Auditors need evidence that these assertions are valid
The financial statement assertions are as follows
=> <u>Classes of transactions(income statement) assertions</u>
Occurence- did the transaction take place?
completeness-are all transactions that should have been included, actually included?
Accuracy- The amounts and other data related to recorded transactions 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
=><u>Account balances at year end(balance sheet) assertions</u>
Existence- assets, liabilities and equity exist
Rights and obligations- the company has a right to hold or control the asset and liabilities are obligations of the company
Completeness- All assets, liabilities and equity interest that should have been recorded have actually been recorded
Valuations and allocations- assets, liabilities and equity interest are recorded at appropriate amounts and any valuations or allocations are appropriately recorded
=> <u>Assertions about presentation and disclosure</u>
Occurence and rights and obligations-disclosed events, transactions and events have occured and belong to the entity
Completeness-All disclosures that should have been included in the financial statements have been included
Classification and understandability-Financial information is appropiately presented and described, and disclosures are understandable
Accuracy and valuation- Information is disclosed at accurate and appropiate amount
For a balance sheet item inventory, the directors are asserting in the financial statements that
Existence- the inventory really exists
Rights- the company has a right towards the inventory
Completeness- All of the inventory has been recorded
valuation- The inventory has been recorded at appropriate amounts
I hope you have understood
03-02-2010, 09:34 PM,
yes sir now i have understood this term
thank u very much.
actually i was confused that what is this assertion which i understood by first few lines of your in which u told me that management makes the Assertion (daawa) regarding particular item either of Account balances or of any of the above mentioned.
and then i understood that those Assertions (daawa) are deemed to be or presumed to be those assertions mentioned in ISA 500. for example,it is presumed from the management disclosure of inventory that management is claiming that inventory exist,rights and obligations are of the management,accuracy of amount and so on.
hence the Auditor has to verify these presumed or predefined Assertions of the management.

Am i Right sir? did i understand it right now.. if any further explanation required then its my pleasure to have that
nevertheless, Thank u very very much sir.


Qureshi Muhammad Zeeshan
03-02-2010, 09:56 PM,
Yeah, you have understood it right. All the best in your audit paper, it's a great subject
03-03-2010, 04:28 AM,
thanks and my paper will be in May
03-04-2010, 12:46 AM,
very good
interesting answer
03-04-2010, 04:58 AM,
Ahan tayaam what is interesting and in which reply? would u plz elaborate

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