Define the assertions about account balance at the period end.
The assertions about account balance at the period end refer to the criteria that auditors use to evaluate the financial statements and determine if the reported account balances are accurate and reliable. These assertions include:
1. Existence: The account balances reported in the financial statements actually exist as of the period end.
2. Completeness: All relevant and material account balances are included in the financial statements.
3. Valuation or Allocation: The account balances are accurately valued and allocated in accordance with the applicable accounting framework.
4. Rights and Obligations: The entity has legal ownership or rights to the account balances and the related obligations are accurately reflected.
5. Presentation and Disclosure: The account balances are appropriately presented and disclosed in the financial statements in accordance with the applicable accounting standards.
6. Accuracy: The account balances are arithmetically accurate and calculations are free from material errors.
Auditors use these assertions to guide their audit procedures and ensure that the financial statements provide a true and fair view of the entity's financial position at the period end.
To define the assertions about account balance at the period end, we need to understand what assertions are and how they relate to financial statements.
In the context of financial reporting, assertions are the representations made by management regarding the financial information presented in the financial statements. They are the underlying assumptions or claims about the completeness, accuracy, and validity of the financial data.
For account balances at the period end, the following assertions can be considered:
1. Existence: This assertion states that the account balances reported in the financial statements actually exist and have transactions or events to support them. It ensures that the balances represent real assets, liabilities, equity, revenues, or expenses.
2. Rights and obligations: This assertion ensures that the entity has legal ownership or responsibility for the assets, liabilities, or equity reported in the account balances. It guarantees that the entity has the right to use its assets and has obligations to settle its liabilities.
3. Completeness: This assertion states that all relevant transactions, events, assets, liabilities, equity, revenues, and expenses have been recorded and included in the account balances. It ensures that nothing has been omitted or left out from the financial statements.
4. Valuation or measurement: This assertion ensures that the account balances have been appropriately measured, valued, and presented in the financial statements. It guarantees that the balances have been recorded based on relevant accounting principles, policies, and estimation techniques.
5. Presentation and disclosure: This assertion ensures that the account balances are properly presented and disclosed in the financial statements. It guarantees that the information is clear, understandable, and relevant, allowing users to make informed decisions.
To get the assertions about account balance at the period end, you can assess the management's representations in the financial statements, refer to accounting standards and regulations, review audit reports or consult financial professionals who deal with financial reporting and analysis.
The assertions about account balance at the period end refer to the integrity and accuracy of financial statements at the end of an accounting period. These assertions are used as a framework to assess the reliability of the reported account balances. The main assertions about account balance at the period end are as follows:
1. Completeness: This assertion ensures that all relevant account balances are included in the financial statements. It signifies that no significant balances or transactions have been omitted.
2. Existence: This assertion ensures that the reported account balances actually exist and can be verified with supporting evidence, such as physical assets or documentation.
3. Valuation: This assertion ensures that the reported account balances are recorded and presented at the appropriate monetary value. It involves evaluating the appropriateness of valuation methods, including considerations for depreciation, amortization, and impairment.
4. Rights and Obligations: This assertion ensures that the reported account balances represent the entity's rights to assets and obligations to liabilities. It involves verifying ownership and legal obligations associated with the reported balances.
5. Accuracy: This assertion ensures that the reported account balances are free from material errors and mistakes. It involves confirming the mathematical accuracy of the balances and checking for any discrepancies or inaccuracies.
6. Cut-off: This assertion ensures that transactions are recorded in the correct accounting period. It involves examining the timing of transactions to make sure they are properly included or excluded from the period under review.
7. Classification: This assertion ensures that the reported account balances are appropriately classified and presented in the financial statements. It involves ensuring that the balances are assigned to the correct financial statement line items or accounts.
By applying these assertions, auditors and accountants can assess the reliability and credibility of the reported account balances at the end of the accounting period.