Financial Statement Assertions 2506

  • Based on what i have read, in accordance with PCAOB, the 5 financial assertions are as follows:
    existence or occurence
    valuation and allocation
    rights and obligations
    presentation and disclosure
    so may i know which broad assertions do accuracy and cut-off fit in?
    my gut feel:
    accuracy => valuation
    cut-off => presentation and disclosure
    any comments? thank you…

  • Cut-off I would see as being, principally, completeness (i.e. you are looking at completeness of sales, accruals, etc.) and partially about existence.
    Accuracy - it really depends. If you are thinking of the assertion that KPMG use then I see that being principally valuation and to a lesser extent completeness and existence. We have this assertion in our approach and I have never liked it, and I never found KPMG to be able to articulate it that well.

  • In our models cut-off sits with completeness. This is where PWC had it and KPMG didn’t have it at all. This is because you are ensuring you capture everything for the financial year in question.
    Accuracy sits for us as a completely separate assertion. Both KPMG and PWC have them separately. We have looked at it with the view that accuracy relates to the accurate capture of payments and receipts into the accounts whereas valuation is a balance sheet matter where the value of something may not equal what you paid for it.
    In fact, in very simplistic terms, the audit teams I have worked with have viewed completeness, existence and accuracy as P-and-L (if I am allowed to use that term.), valuation, ownership, rights and obligations as BS and presentation and disclosure as year end.
    Interpretation does, however, seem very much down to your local external audit team and the definition they apply to each assertion.

Log in to reply