1. What is Assertion?

According to PSA 315, Assertion refers to the representations by management,

explicit or otherwise, that are embodied in the financial statements, as used by
the auditor to consider the different types of potential misstatements that may
occur.

Transaction-level assertions. The following five items are classified as

assertions related to transactions, mostly in regard to the income statement:

ASSERTIONS DEFINITIONS EXAMPLES

Accuracy The full amounts of all The correct and total
transactions were amount of the supplies
recorded without error. purchased has been
recorded.
Classification All transactions have The supplies used and
been recorded within the purchased have been
correct accounts in the fairly allocated in
general ledger. prepaid supplies and
supplies expense.
Completeness All business events to All the supplies used
which the company was and purchased have
subjected were been fully accounted for.
recorded.
Cutoff All transactions were All the supplies used
recorded within the have been taken off
correct reporting period. correctly in the prepaid
supplies at the end of
the period.
Occurrence Transactions recognized Recording acquisition of
in the financial supplies that actually
statements have took place.
occurred.

Account balance assertions. The following four items are classified as

assertions related to the ending balances in accounts, and so relate primarily to
the balance sheet:

ASSERTIONS DEFINITIONS EXAMPLES

Completeness All reported asset, All equipment
liability, and equity recognized in the
balances have been fully balance sheet exists at
reported. the period end.
 Existence All account balances All equipment units that
exist for assets, should have been
liabilities, and equity recorded have been
recognized in the
financial statements.
Rights and obligations The entity has the rights Audit entity owns or
to the assets it owns and controls the equipment
is obligated under its recognized in the
reported liabilities. financial statements.
Valuation All asset, liability, and All the equipment have
equity balances have been recorded at its
been recorded at their proper depreciated cost.
proper valuations.

Presentation and disclosure assertions. The following five items are classified
as assertions related to the presentation of information within the financial
statements, as well as the accompanying disclosures:

ASSERTIONS DEFINITIONS EXAMPLES

Accuracy All information disclosed Related party
is in the correct transactions, balances
amounts, and which and events have been
reflect their proper disclosed accurately at
values. their appropriate
amounts.
Completeness All transactions that All related parties,
should be disclosed related party
have been disclosed. transactions and
balances that should
have been disclosed
have been disclosed in
the notes of financial
statements.
Occurrence All disclosed Transactions with
transactions have indeed related parties disclosed
occurred. in the notes of financial
statements have
occurred during the
period.
Understandability All the information The nature of related
included in the financial party transactions,
statements has been balances and events
appropriately presented has been clearly
and is clearly disclosed in the notes of
understandable. financial statements.
References:
http://www.aasc.org.ph/downloads/PSA/publications/PDFs/PSA-315-Redrafted.pdf
https://accounting-simplified.com/audit/introduction/audit-assertions.html
https://www.accountingtools.com/articles/what-are-management-assertions-in-
auditing.html