What are the financial statement assertions made by management accounting to ISA 500?
Under the International Standard on Auditing (ISA) 500, the financial statement assertions made by management accounting are as follows:
1. Existence or occurrence: Financial statement items exist at a given date, and transactions and events have occurred during the period.
2. Completeness: All transactions and events that should have been recorded have been recorded and are included in the financial statements.
3. Rights and obligations: The entity has legal rights to assets and revenue, and liabilities are obligations of the entity.
4. Valuation or allocation: Assets, liabilities, revenue, and expenses are valued or allocated appropriately and in accordance with the applicable financial reporting framework.
5. Presentation and disclosure: Financial statements are properly presented, described, and disclosed in accordance with the applicable financial reporting framework to achieve fair presentation.
These assertions provide reasonable assurance to auditors that the financial statements are free from material misstatement. By making these assertions, management takes responsibility for presenting accurate and complete financial information. Auditors then perform procedures to assess whether these assertions are valid and reliable, ensuring the reliability of the financial statements.
The financial statement assertions, also known as management assertions, made by management accounting to ISA 500 (International Standard on Auditing 500) are as follows:
1. Existence: The assets, liabilities, and equity interests exist at the balance sheet date and transactions and events occurred that pertain to the entity during the financial reporting period.
2. Rights and Obligations: The entity has legal ownership or the right to use the assets, and the liabilities represent the entity's obligations.
3. Completeness: All the transactions and events that should have been recorded have been recorded, and all related disclosures have been included in the financial statements.
4. Valuation and Allocation: The assets, liabilities, equity interests, and components of financial statements have been included at appropriate amounts and any resulting valuation or allocation adjustments are properly recorded.
5. Presentation and Disclosure: The components of financial statements are properly classified, described, and disclosed in accordance with the applicable financial reporting framework.
These assertions are made by management to provide reasonable assurance that the financial statements are free from material misstatement and are prepared in accordance with the applicable financial reporting framework. Auditors then assess the reasonableness of these assertions as part of their audit procedures.
To find out the financial statement assertions made by management accounting to ISA 500, we first need to understand what ISA 500 is.
ISA 500, or International Standard on Auditing 500, is a standard set by the International Auditing and Assurance Standards Board (IAASB). It provides guidance to auditors regarding the auditor's responsibility to obtain sufficient appropriate audit evidence and draw conclusions on which to base their audit opinion.
Financial statement assertions in management accounting refer to the implicit or explicit claims and representations that management makes when preparing financial statements. These assertions provide the auditors with a framework to assess the reasonableness of the financial statements and the related disclosures.
The financial statement assertions can be categorized into the following six components, as defined in ISA 500:
1. Existence or occurrence: Transactions and events that have been recorded have occurred and pertain to the entity.
2. Completeness: All transactions and events that should have been recorded have been included in the financial statements.
3. Valuation or allocation: Financial statement elements are included in the financial statements at appropriate amounts and any resulting allocations are appropriately recorded.
4. Rights and obligations: The entity holds or controls the rights to assets, and liabilities are obligations of the entity.
5. Presentation and disclosure: The components of the financial statements are properly classified, described, and disclosed.
6. Understandability and accuracy: The financial statements are expressed in a manner that makes them understandable and free from material misstatements.
Management accounting ensures that these assertions are met by performing various procedures, including internal control assessments, record reconciliations, analytical reviews, and other necessary steps to support the financial statement preparations.
In conclusion, the financial statement assertions made by management accounting to ISA 500 include existence or occurrence, completeness, valuation or allocation, rights and obligations, presentation and disclosure, and understandability and accuracy. Following these assertions helps ensure the reliability and accuracy of the financial statements.