Management's Assertions

.pdf
School
Temple University **We aren't endorsed by this school
Course
ACCOUNTING 340
Subject
Accounting
Date
Nov 14, 2023
Pages
1
Uploaded by naikamit on coursehero.com
Management's Assertions You will become familiar with the term Management's Assertions because audit procedures and test are designed for each of these assertions. Try looking at an assertion as a statement or claim regarding a fact that is made by someone to you. Facts can be verified. If a fact cannot be verified, how likely are you to rely on that person's assertion? Try considering the assertions in the context of preparing the financial statements. The previous lesson reviewed the GAAP framework. The is Objective; "to provide financial information that is useful to capital providers." When financial statements are given to a lender, the statements imply that management is stating, for example, the assets exist, belong to the company; the amounts shown are complete, properly valued, and classified. The lender says prove it! The assertions serve a dual purpose. 1) assertions can be tested and 2) assertions be used to develop a list of questions or issues based determining what can go wrong. This is where the auditor's knowledge of GAAP is so important. The auditor uses management's assertion during the planning of the audit and by designing or selecting how to evaluate each assertion for balance sheet and income statement accounts. Then, documents the results by describing the test and result. This documentation will be evidence that verifies or disputes the related assertion. Evidence Evidence is documentation that the supports the auditor's conclusions and the audit opinion. Evidence may be collected in various forms, such as electronic media, printed reports, or by observation by the auditor. The auditor must accumulate and evaluate for evidence both sufficiency (quantity) and relevance (quality). The quantity and quality of evidence collected are, in part, based on the auditor's professional judgement. So far, we have introduced general topics about auditing but what about the auditor? What are a few expectations placed on the auditor in addition to being a CPA? Independence Independence is one of the core attributes required in the auditing profession. The CPA and the CPA firm must be independent in both appearance and in actual fact. Freedom from outside influences and an objective approach are critical to the proper evaluation of evidence and the appropriate conclusion.
Page1of 1
Uploaded by naikamit on coursehero.com