Items recorded actually exist at the balance sheet date. There are seven types of audit assertions that are listed in the table below: Audit Assertions Transactions and events Account balances Description Existence or occurrence Occurrence Existence Transactions or events recorded actually occurred during the accounting period. Thus, as auditors, we have responsibilities to perform suitable auditing procedures in order to provide the evidence necessary to persuade that there is no material misstatement related to each of the relevant assertions in the financial statements.
In this case, we can determine the different types of misstatements that could occur for each of the relevant audit assertions and then develop auditing procedures that are appropriate to respond to the assessed risks. Likewise, we usually use these assertions to assess external financial reporting risks. The audit assertions can provide us the clues on the potential misstatements that might occur on financial statements. Hence, the financial statements contain management’s assertions about the transactions, events and account balances and related disclosures that are required by the applicable accounting standards such as US GAAP or IFRS. The preparation of financial statements is the responsibility of the client’s management. The moment the financial statements are produced, the assertions or the claims of management also exist, e.g., all items in the income statement are assured to be complete and accurate, etc. Audit assertions, financial statement assertions, or management’s assertions, are the claims made by the management of the company on financial statements.
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