Question

financial statements assertions:

a. List the 5 key financial statements assertions and explain each one

b. Identify who owns the financial statements assertions

c. Explain the auditors responsibility for the financial statements assertions

Answer 1

a. List the 5 key financial statements assertions and explain each one
1	Accuracy
		It is assumed that the financial or other information contained in financial statements are accurate. Stakeholders can trust the data and make decisions on the basis of financial statements.
2	Complete
		The data contained in financial statements are complete in all aspects. The difference between the accuracy and completeness, accuracy refers to the truthness of the data whereas completeness means the information is not incomplete. In other words, financial statements can have incomplete data which is accurate.
3	Existence
		It is assumed the transactions on the basis of which financial statements have been prepared are actually occured during the year. No fraudulent transaction has been reported in financial statements.
4	Valuation
		All the transaction are properly valued. Undervaluation or overvaluation has not been done in the financials. Reports of valuation Experts wherever needed have been properly taken.
5	Reporting period
		Transaction are reported in the correct reporting period. It is assumed that defferment of reporting or early reporting of transaction has not been done.
b. Identify who owns the financial statements assertions
	Financial statements assertions are also governed by various Laws. Declaration from Management/ Auditors and Key Managerial Personnels has generally been taken that all the assertions are taken while preparing financial statements. If any deviation exists from all the assertions then that has to be seperately reported in the financial statements with their financial effects. We can say that Management/ Auditors and Key Managerial Personnels are the persons who owns the financial statements assertions.
c. Explain the auditors responsibility for the financial statements assertions
	Auditors certify the financial statements that the information contained in the financial statements are correct and true in all aspects and people can rely upon that. So in laymen terms, we can say Auditors build the trust of people/Stakeholders in the financial statments. Auditors are playing a very vital role in the industry. So the responsibility of Auditors are being governed by various Laws, Regulations and Rules. Many penalties and imprisonments have been prescribed in Laws.