In general, the objective of an audit is to assess the risk of material misstatements in the financial
statements. Material misstatements can arise from inadequacies in internal controls and from
inaccurate management assertions. Thus, testing the validity of the various implicit managerial
assertions is a key objective of an auditor.
Existence and Completeness
Auditing standards require that auditors test basic underlying management assertions implicit in
the financial statements. Key among these various assertions are existence or occurrence, which
describe a singular concept: Journal entries are not fiction. As the name implies, an auditor will
conduct various procedures to verify that assets do in fact exist and that recorded transactions did
in fact occur. Additionally, an auditor will seek evidence of completeness, so that the financial
statements include all material transactions that occurred, and so the records do not omit material
transactions for any reason.
Rights and Obligations
The various rights and obligations of the company are important management assertions inherent
in the financial statements. Thus, an auditor will obtain evidence regarding a company\'s rights,
such as proper title to assets and status of intellectual property. An auditor will be concerned
with assertions relating to the company\'s obligations, such as accounts payable balances, long-
term debts and tax liabilities. Thus, the audit objectives will be fulfilled upon validating these
specific assertions.
Valuation or Allocation
Valuation or allocation are managerial assertions which are often material to the financial
statements; thus, an auditor will diligently conduct audit procedures relating to these objectives.
Generally accepted accounting principles, or GAAP, require that certain balance sheet items be
presented using different valuation methodologies. Meeting these standards is a key audit
objective, as the risk of material misstatement is low in probability, but high in magnitude. Thus,
among other things, the historical cost of assets is verified, depreciation methods are scrutinized
and the fair value of investments are calculated to satisfy this objective.
Presentation and Disclosure
Another specific audit objective is validating the presentation of the financial statements and the
adequacy of the disclosures therein. Financial statements should conform to certain requirements
and expectations, and should include the balance sheet, income statement, statement of cash
flows and the statement of owner\'s equity. Relating to disclosure, the auditor will consider the
sufficiency and clarity of footnotes and the transparency in management discussion and analysis,
so he can assess the risk of material misstatement and fulfill the audit objective.
Specific audit objectives are the application of the general audit objectives to a given class of
transactions, account balance, or presentation and disclosure. There must be at least one specific
audit object.
A Critique of the Proposed National Education Policy Reform
In general, the objective of an audit is to assess the risk of mater.pdf
1. In general, the objective of an audit is to assess the risk of material misstatements in the financial
statements. Material misstatements can arise from inadequacies in internal controls and from
inaccurate management assertions. Thus, testing the validity of the various implicit managerial
assertions is a key objective of an auditor.
Existence and Completeness
Auditing standards require that auditors test basic underlying management assertions implicit in
the financial statements. Key among these various assertions are existence or occurrence, which
describe a singular concept: Journal entries are not fiction. As the name implies, an auditor will
conduct various procedures to verify that assets do in fact exist and that recorded transactions did
in fact occur. Additionally, an auditor will seek evidence of completeness, so that the financial
statements include all material transactions that occurred, and so the records do not omit material
transactions for any reason.
Rights and Obligations
The various rights and obligations of the company are important management assertions inherent
in the financial statements. Thus, an auditor will obtain evidence regarding a company's rights,
such as proper title to assets and status of intellectual property. An auditor will be concerned
with assertions relating to the company's obligations, such as accounts payable balances, long-
term debts and tax liabilities. Thus, the audit objectives will be fulfilled upon validating these
specific assertions.
Valuation or Allocation
Valuation or allocation are managerial assertions which are often material to the financial
statements; thus, an auditor will diligently conduct audit procedures relating to these objectives.
Generally accepted accounting principles, or GAAP, require that certain balance sheet items be
presented using different valuation methodologies. Meeting these standards is a key audit
objective, as the risk of material misstatement is low in probability, but high in magnitude. Thus,
among other things, the historical cost of assets is verified, depreciation methods are scrutinized
and the fair value of investments are calculated to satisfy this objective.
Presentation and Disclosure
Another specific audit objective is validating the presentation of the financial statements and the
adequacy of the disclosures therein. Financial statements should conform to certain requirements
and expectations, and should include the balance sheet, income statement, statement of cash
flows and the statement of owner's equity. Relating to disclosure, the auditor will consider the
sufficiency and clarity of footnotes and the transparency in management discussion and analysis,
so he can assess the risk of material misstatement and fulfill the audit objective.
Specific audit objectives are the application of the general audit objectives to a given class of
2. transactions, account balance, or presentation and disclosure. There must be at least one specific
audit objective for each general audit objective and in many cases there should be more. Specific
audit objectives for a class of transactions, account balance, or presentation and disclosure
should be designed such that, once they have been satisfied, the related general audit objective
should also have been satisfied for that class of transactions, account, or presentation and
disclosure.
in matching firstidentify the general transaction-related audit objectives for each specific
transaction-related audit objective. It is then easy to determine the management assertion
SPECIFIC TRANSACTION-RELATED AUDIT OBJECTIVE
b.
MANAGEMENT ASSERTION
c.
GENERAL TRANSACTION-RELATED AUDIT OBJECTIVE
a. Recorded cash disbursement transactions are for the amount of goods or services received
and are correctly recorded.
3. Accuracy
8. Accuracy
b. Cash disbursement transactions are properly included in the accounts payable master file
and are correctly summarized.
3. Accuracy
9. Posting and
summarization
c. Recorded cash disbursements are for goods and services actually received.
1. Occurrence
6. Occurrence
d. Cash disbursement transactions are properly classified.
4. Classification
10. Classification
e. Existing cash disbursement transactions are recorded.
2. Completeness
7. Completeness
f. Cash disbursement transactions are recorded on the correct dates.
5. Cutoff
11. Timing
SPECIFIC TRANSACTION-RELATED AUDIT OBJECTIVE
b.
3. MANAGEMENT ASSERTION
c.
GENERAL TRANSACTION-RELATED AUDIT OBJECTIVE
a. Recorded cash disbursement transactions are for the amount of goods or services received
and are correctly recorded.
3. Accuracy
8. Accuracy
b. Cash disbursement transactions are properly included in the accounts payable master file
and are correctly summarized.
3. Accuracy
9. Posting and
summarization
c. Recorded cash disbursements are for goods and services actually received.
1. Occurrence
6. Occurrence
d. Cash disbursement transactions are properly classified.
4. Classification
10. Classification
e. Existing cash disbursement transactions are recorded.
2. Completeness
7. Completeness
f. Cash disbursement transactions are recorded on the correct dates.
5. Cutoff
11. Timing
Solution
In general, the objective of an audit is to assess the risk of material misstatements in the financial
statements. Material misstatements can arise from inadequacies in internal controls and from
inaccurate management assertions. Thus, testing the validity of the various implicit managerial
assertions is a key objective of an auditor.
Existence and Completeness
Auditing standards require that auditors test basic underlying management assertions implicit in
the financial statements. Key among these various assertions are existence or occurrence, which
describe a singular concept: Journal entries are not fiction. As the name implies, an auditor will
conduct various procedures to verify that assets do in fact exist and that recorded transactions did
4. in fact occur. Additionally, an auditor will seek evidence of completeness, so that the financial
statements include all material transactions that occurred, and so the records do not omit material
transactions for any reason.
Rights and Obligations
The various rights and obligations of the company are important management assertions inherent
in the financial statements. Thus, an auditor will obtain evidence regarding a company's rights,
such as proper title to assets and status of intellectual property. An auditor will be concerned
with assertions relating to the company's obligations, such as accounts payable balances, long-
term debts and tax liabilities. Thus, the audit objectives will be fulfilled upon validating these
specific assertions.
Valuation or Allocation
Valuation or allocation are managerial assertions which are often material to the financial
statements; thus, an auditor will diligently conduct audit procedures relating to these objectives.
Generally accepted accounting principles, or GAAP, require that certain balance sheet items be
presented using different valuation methodologies. Meeting these standards is a key audit
objective, as the risk of material misstatement is low in probability, but high in magnitude. Thus,
among other things, the historical cost of assets is verified, depreciation methods are scrutinized
and the fair value of investments are calculated to satisfy this objective.
Presentation and Disclosure
Another specific audit objective is validating the presentation of the financial statements and the
adequacy of the disclosures therein. Financial statements should conform to certain requirements
and expectations, and should include the balance sheet, income statement, statement of cash
flows and the statement of owner's equity. Relating to disclosure, the auditor will consider the
sufficiency and clarity of footnotes and the transparency in management discussion and analysis,
so he can assess the risk of material misstatement and fulfill the audit objective.
Specific audit objectives are the application of the general audit objectives to a given class of
transactions, account balance, or presentation and disclosure. There must be at least one specific
audit objective for each general audit objective and in many cases there should be more. Specific
audit objectives for a class of transactions, account balance, or presentation and disclosure
should be designed such that, once they have been satisfied, the related general audit objective
should also have been satisfied for that class of transactions, account, or presentation and
disclosure.
in matching firstidentify the general transaction-related audit objectives for each specific
transaction-related audit objective. It is then easy to determine the management assertion
SPECIFIC TRANSACTION-RELATED AUDIT OBJECTIVE
b.
5. MANAGEMENT ASSERTION
c.
GENERAL TRANSACTION-RELATED AUDIT OBJECTIVE
a. Recorded cash disbursement transactions are for the amount of goods or services received
and are correctly recorded.
3. Accuracy
8. Accuracy
b. Cash disbursement transactions are properly included in the accounts payable master file
and are correctly summarized.
3. Accuracy
9. Posting and
summarization
c. Recorded cash disbursements are for goods and services actually received.
1. Occurrence
6. Occurrence
d. Cash disbursement transactions are properly classified.
4. Classification
10. Classification
e. Existing cash disbursement transactions are recorded.
2. Completeness
7. Completeness
f. Cash disbursement transactions are recorded on the correct dates.
5. Cutoff
11. Timing
SPECIFIC TRANSACTION-RELATED AUDIT OBJECTIVE
b.
MANAGEMENT ASSERTION
c.
GENERAL TRANSACTION-RELATED AUDIT OBJECTIVE
a. Recorded cash disbursement transactions are for the amount of goods or services received
and are correctly recorded.
3. Accuracy
8. Accuracy
b. Cash disbursement transactions are properly included in the accounts payable master file
and are correctly summarized.
3. Accuracy
6. 9. Posting and
summarization
c. Recorded cash disbursements are for goods and services actually received.
1. Occurrence
6. Occurrence
d. Cash disbursement transactions are properly classified.
4. Classification
10. Classification
e. Existing cash disbursement transactions are recorded.
2. Completeness
7. Completeness
f. Cash disbursement transactions are recorded on the correct dates.
5. Cutoff
11. Timing