Audit Assertions
Assertions may be classified into the following types:
Assertions relating to classes of transactions
Assertions Explanation
Occurrence Transactions recognized in
the financial statements have
occurred and relate to the
entity.
Completeness All transactions that were
supposed to be recorded
have been recognized in the
financial statements.
Accuracy Transactions have been
recorded accurately at their
appropriate amounts.
Cut-off Transactions have been
recognized in the correct
accounting periods.
Classification Transactions have been
classified and presented fairly
in the financial statements.
Assertions relating to assets, liabilities and equity balances at the period end
Assertions Explanation
Existence Assets, liabilities and equity
balances exist at the period
end.
Completeness All assets, liabilities and
equity balances that were
supposed to be recorded
Examples: Salaries & Wages Cost
Salaries & wages expense has been incurred during
the period in respect of the personnel employed by
the entity. Salaries and wages expense does not
include the payroll cost of any unauthorized
personnel.
Salaries and wages cost in respect of all personnel
have been fully accounted for.
Salaries and wages cost has been calculated
accurately. Any adjustments such as tax deduction
at source have been correctly reconciled and
accounted for.
Salaries and wages cost recognized during the
period relates to the current accounting period. Any
accrued and prepaid expenses have been
accounted for correctly in the financial statements.
Salaries and wages cost has been fairly allocated
between:
-Operating expenses incurred in production
activities;
-General and administrative expenses; and
-Cost of personnel relating to any self-constructed
assets other than inventory.
Examples: Inventory balance
Inventory recognized in the balance sheet exists at
the period end.
All inventory units that should have been recorded
have been recognized in the financial statements.
Any inventory held by a third party on behalf of the
 have been recognized in the audit entity has been included in the inventory
financial statements. balance.

Rights & Entity has the right to
Obligations ownership or use of the
recognized assets, and the
liabilities recognized in the
financial statements
represent the obligations of
the entity.
Audit entity owns or controls the inventory
recognized in the financial statements. Any inventory
held by the audit entity on account of another entity
has not been recognized as part of inventory of the
audit entity.

Valuation Assets, liabilities and equity
balances have been valued
appropriately.
Inventory has been recognized at the lower of cost
and net realizable value in accordance with IAS 2
Inventories. Any costs that could not be reasonably
allocated to the cost of production (e.g. general and
administrative costs) and any abnormal wastage has
been excluded from the cost of inventory. An
acceptable valuation basis has been used to value
inventory cost at the period end (e.g. FIFO, AVCO,
etc.)

Assertions relating to presentation and disclosures

Assertions Explanation Examples: Related Party Disclosures

Occurrence Transactions and events disclosed Transactions with related parties disclosed
in the financial statements have in the notes of financial statements have
occurred and relate to the entity. occurred during the period and relate to the
audit entity.

Completeness All transactions, balances, events
and other matters that should
have been disclosed have been
disclosed in the financial
statements.
All related parties, related party
transactions and balances that should
have been disclosed have been disclosed
in the notes of financial statements.

Classification & Disclosed events, transactions,
Understandability 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.
The nature of related party transactions,
balances and events has been clearly
disclosed in the notes of financial
statements. Users of the financial
statements can clearly determine the
financial statement captions affected by the
related party transactions and balances
and can easily ascertain their financial
effect.

Accuracy & Transactions, events, balances Related party transactions, balances and
Valuation and other financial matters have events have been disclosed accurately at
been disclosed accurately at their their appropriate amounts.
appropriate amounts.
Use and Application
Auditors are required by ISAs to obtain sufficient & appropriate audit evidence in respect of all material
financial statement assertions. The use of assertions therefore forms a critical element in the various stages
of a financial statement audit as described below.

Stage of Application of Assertions

Audit

Planning As part of the risk assessment procedures, auditors are required to understand the entity
and its environment including the assessment of the risk of material misstatement
(ROMM) due to fraud and error at the financial statement and assertion level. (ISA 315.3
)

The assessment of ROMM at the financial statement and assertion level provides the
basis for determining the nature, timing and extent of audit procedures that are
necessary to obtain sufficient and appropriate audit evidence in response to those
assessed risks. (ISA 200.A36)

Testing Substantive tests are performed to identify material misstatements at the assertion level.
In case of assertions whose ROMM has been assessed as significant and no tests of
control are planned to be performed, the substantive procedures should include tests of
detail (i.e. substantive analytical procedures alone cannot be considered as sufficient
and appropriate audit evidence for assertions with a significant risk of material
misstatement. (ISA 330.21)

Tests of control (TOCs) are performed to assess the operating effectiveness of controls
at the financial statement and assertion level. TOCs are necessary to validate the
auditor's expectation of the operating effectiveness of controls (as acquired from the risk
assessment procedures performed at the planning stage) and also in case where the
performance of substantive procedures alone cannot provide sufficient and appropriate
audit evidence in respect of a specific assertion. (ISA 330.8)

Completion Auditor shall conclude whether sufficient and appropriate audit evidence has been
obtained for all material financial statement assertions taking into account any revisions
in the assessment of ROMM at the assertion level. (ISA 330.25-6)

Where an auditor is unable to obtain sufficient and appropriate audit evidence in respect
of a material financial statement assertion, he is required to modify the audit report
accordingly. (ISA 330.27)