Auditors verify the accuracy of financial statements by testing assertions. There are three types of assertions - transaction level, account balance, and presentation/disclosure. Transaction level assertions ensure accuracy and validity of individual transactions. Account balance assertions check accuracy of assets, liabilities and equity on the balance sheet. Presentation/disclosure assertions ensure financial information is accurately classified, disclosed and understandable in the statements. By testing that transactions and account balances meet the relevant assertions, auditors can determine if the financial statements are fairly presented.

1. Creativity is a light that keeps shining
through the darkest of nights.
Assertions in
Auditing

2. What are assetions
1 3
4
2
Account Balance Assertions
Transaction Level Assertions
Presentation and Disclosure
Assertions
Today's Agenda

3. Audited financial statements include the income statement which shows
the company's performance, the balance sheet which reports the financial
position at a specific time, and the cash flow statement which reveals cash
inflows and outflows; auditors verify accuracy of transactions, existence of
assets and liabilities, and accuracy of presented figures.
In order to ensure that financial records and disclosures are accurate and
appropriate, certain characteristics known as assertions must be tested. If all
relevant transactions or balances meet these assertions, then the financial
statements have been appropriately recorded
What are assertions

4. Transaction level
assertions
Transaction level assertions are utilized
by auditors when examining journal
entries and transactions to ensure the
accuracy, completeness, and validity of
financial information
Occurrence
Transactions
recorded in the
financial
statements actually
occurred and are
valid
Completeness
Transactions that
should have been
recorded have been
included in the
financial
statements
Classification
Transactions have
been classified
properly and fairly
presented in the
financial
statements.
Cut-off
Transaction is
recorded in the
correct accounting
period
Accuracy
Transactions are
recorded at the
correct amounts.

5. Account balance
assertions
Account balance assertions are used to
check the accuracy of balance sheet
items, including assets, liabilities, and
equity totals.
Valuation
Making sure the
assets, liabilities,
and equity balances
are correctly
valued.
Rights &
Obligations
Making sure the
company has legal
rights to the assets
and the liabilities
represent actual
obligations
Completeness
Making sure all
items that should
be included in the
financial
statements are
recorded
Existence
Making sure the
assets, liabilities,
and equity balances
actually exist

6. Presentation and
disclosure
assertions
The third type of assertion used by
auditors is the presentation and
disclosure assertion, which can apply to
both transaction-level assertions and
account balance assertions.
Accuracy and
Valuation
Ensuring that
financial records
are disclosed
accurately and at
appropriate
valuations
Classification and
Understandability
Ensuring that
financial records
are properly
classified and
presented in a clear
and understandable
manner
Completeness
Ensuring that all
relevant financial
records are
disclosed within
the financial
statements
Occurrence
Ensuring that
financial records
are related to the
entity and have
occurred.

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