Question

How do occurrence/existence and completeness audit objectives address overstatements or understatements differently than accuracy and classification audit objectives?

Answer 1

*Any doubt please comment

A completeness assertion tries to address the issues opposite to that of the existence assertion. A completeness assertion deals with the possibility of excluding items from the financial statements that should have been included while existence assertion is related to the inclusion of items that should not have been included. A violation of the existence assertion can lead to overstatement of accounts while a violation of the completeness assertion results in understatement. On the other hand accuracy assertion deals with recording accounts without any error in recording i.e. either in terms of quantity or monetary value. Classification assertion deals with if the transactions are included in appropriate accounts. For example a misclassifcation arises if sales is recorded as a liability in the books. The books will still tally but the error will not be discovered. Occurrence/existence and completeness audit objectives address overstatements or understatements differently than the accuracy and classfication assertions since the latter assertion are difficult to discover in case of errors while the former is easier to discover for any material misstaments. An account can be wrongly classified but if it follows the correct accounting rule there will no overstatement or understatement of accounts. Similar rule applies for inaccurate accounts. If the amount recorded on the debit and credit is same although incorrect there is no over or understatement.  However if the completeness assertion is violated , for example, the accounts receivable does not include an year end credit sale can be diagnosed and the management can be asked to include it in financial statements. Violations of completeness and existence do not match the accounts on the face of it and hence are easier to identify.