Guide to Using International Standards on Auditing in - IFAC

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<strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts
When management makes a representation <strong>to</strong> the audi<strong>to</strong>rs such as “the financial statements as a whole
are presented fairly in accordance with the applicable financial reporting framework,” it actually contains a
number of embedded assertions.
These embedded assertions (by management) relate <strong>to</strong> the recognition, measurement, presentation, and
disclosure of the various elements (amounts and disclosures) in the financial statements.
Examples of management’s assertions include:
• All the assets in the financial statements exist;
• All sales transactions have been recorded in the appropriate period;
• Inven<strong>to</strong>ries are stated at appropriate values;
• Payables represent proper obligations of the entity;
• All recorded transactions occurred in the period under review; and
• All amounts are properly presented and disclosed in the financial statements.
These assertions are often summarized by a single word such as completeness, existence, occurrence,
accuracy, valuation, et al. For example, management may assert <strong>to</strong> the audi<strong>to</strong>r that the sales balance in the
accounting records contains all the sales transactions (completeness assertion), the transactions <strong>to</strong>ok place
and are valid (occurrence assertion), and transactions have been properly recorded in the accounting records
and in the appropriate accounting period (accuracy and cu<strong>to</strong>ff assertion).
6.2 Description of Assertions
Paragraph A111 of ISA 315 describes the categories of assertions that can be used by the audi<strong>to</strong>r <strong>to</strong> consider
the different types of potential misstatements. These categories are described in the exhibit below.
Exhibit 6.2-1
Classes of
Transactions
and Events
for the Period
under Audit
Assertion
Occurrence
Completeness
Accuracy
Cu<strong>to</strong>ff
Classification
Description
Transactions and events that have been recorded have occurred and
pertain <strong>to</strong> the entity.
All transactions and events that should have been recorded have
been recorded.
Amounts and other data relating <strong>to</strong> recorded transactions and
events have been recorded appropriately.
Transactions and events have been recorded in the correct
accounting period.
Transactions and events have been recorded in the proper accounts.