List the major financial statement assertions.
The major financial statement assertions are:
1. Existence or occurrence: The assets, liabilities, revenues, and expenses reported on the financial statements actually exist and have occurred during the reporting period.
2. Completeness: All transactions and events that should have been recorded in the financial statements have been included.
3. Valuation or allocation: Assets, liabilities, revenues, and expenses have been recorded at their appropriate values in accordance with the relevant accounting standards.
4. Rights and obligations: The entity has the legal rights to its assets and liabilities reported on the financial statements.
5. Presentation and disclosure: The financial statements are properly presented and all necessary disclosures have been made in order to provide users with accurate and relevant information.
The major financial statement assertions can be classified into five categories:
1. Existence or Occurrence: This assertion is concerned with whether the reported assets, liabilities, revenues, and expenses actually exist or have occurred during the stated period.
2. Completeness: This assertion ensures that all relevant financial information is recorded and presented in the financial statements, and that there are no omissions.
3. Valuation or Allocation: This assertion checks whether the assets and liabilities are recorded at their appropriate values, and whether revenues and expenses are properly allocated in accordance with accounting standards.
4. Rights and Obligations: This assertion confirms that the entity has legal ownership or rights to the assets included in the financial statements, and that the reported liabilities represent the entity's legal obligations.
5. Presentation and Disclosure: This assertion deals with the proper presentation of financial information in the statements, including appropriate classification, descriptions, and additional details, as required by accounting standards.
To determine the major financial statement assertions, one can refer to auditing or accounting standards, such as the Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS). These standards provide detailed guidance on the assertions that auditors or accountants should consider when evaluating the fairness and reliability of financial statements.
The major financial statement assertions are as follows:
1. Existence or occurrence: This assertion ensures that the reported transactions and balances actually occurred and pertain to the entity.
2. Completeness: This assertion ensures that all relevant transactions and balances have been recorded and included in the financial statements.
3. Valuation or allocation: This assertion ensures that the assets, liabilities, revenues, and expenses are properly recorded at their appropriate values in the financial statements.
4. Rights and obligations: This assertion ensures that the entity has the legal rights to its assets and obligations, and that the financial statements accurately reflect these rights and obligations.
5. Presentation and disclosure: This assertion ensures that the financial statements are presented in a clear and understandable manner and contain all necessary disclosures to enable users to make informed decisions.
6. Accuracy or cutoff: This assertion ensures that transactions and balances are recorded in the appropriate accounting period, and that the financial statements are free from material misstatements.
7. Classification: This assertion ensures that transactions and balances are properly classified in the financial statements, in accordance with the relevant accounting standards or principles.
These assertions are used by auditors and preparers of financial statements to provide reasonable assurance that the financial statements are free from material misstatements and fairly present the financial position, performance, and cash flows of the entity.