Question

In: Accounting

When there is a high risk that expenses are understated, which of the following assertions is...

When there is a high risk that expenses are understated, which of the following assertions is most likely to be affected?

		Occurrence.
		Accuracy.
		Completeness.
		Valuation and allocation.

The completeness assertion would be violated if:

		the allowance for doubtful accounts was understated.
		unbilled shipments had occurred during the period.
		the balance of accounts payable was overstated.
		all of the above would violate the completeness assertion.

ShoeWorld sells a large range of sporting shoe brands from different manufacturers, and a large amount of inventory is on consignment. The key audit risk to be addressed at year-end is:

		valuation of inventory.
		rights and obligations in relation to inventory.
		existence of inventory.
		classification of inventory.

Expert Solution

Audit Assertions are the implicit or explicit claims and representations made by the management responsible for the preparation of financial statements regarding the appropriateness of the various elements of financial statements.Audit Assertions are also known as Management Assertions and Financial Statement Assertions.

ASSERTION

EXPLAINATION

OCCURANCE

Transactions and events disclosed in the financial statements have occurred and relate to the entity.

COMPLETENESS

All transactions, balances, events and other matters that should have been disclosed have been disclosed in the financial statements.

CLASSIFICATION AND UNDERSTANDABILITY

Disclosed events, transactions, balances and other financial matters have been classified appropriately and presented clearly in a manner that promotes the understandability of information contained in the financial statements.

ACCUARCY AND VALUATION

Transactions, events, balances and other financial matters have been disclosed accurately at their appropriate amounts.

Assertions assist auditors in considering a wide range of issues that are relevant to the authenticity of financial statements. The consideration of management assertions during the various stages of audit helps to reduce the audit risk.

ekkarill92 answered 2 years ago

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