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Lesson 51, Topic 3

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✏️+🎥Example: Management Assertions🟢

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Assertions-CPA-Simulations Download

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ANGAD BIR SINGH 15 September 2024

Any chance number 12 pertains to the Accuracy assertion for accounts balances? Or, is presentation the more relevant assertion to be tested?

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1. Maroun, CPA 18 September 2024
  
  Hello Angad Bir,
  
  Number 12: “Confirm that the disclosures related to receivables are presented at the correct amounts in the financial statements” could lead to different conclusions depending on whether we’re using the AICPA or PCAOB frameworks.
  
  The AICPA divides management assertions into three broad categories, with Presentation and Disclosure being one of the main categories related to how information is disclosed in financial statements. The other two broad categories are: Classes of Transactions and Events and Account Balances.
  
  Within the broad category of Presentation and Disclosure, there are four specific assertions:
  
  – Occurrence and Rights and Obligations:
  This ensures that disclosed events and transactions have occurred and pertain to the entity.
  – Completeness: All disclosures that should have been included in the financial statements are included.
  – Classification and Understandability: Financial information is appropriately presented and described, and disclosures are clearly expressed.
  – Accuracy and Valuation: This subcategory ensures that financial and other information are disclosed fairly and at appropriate amounts.
  
  In the AICPA framework, your question about whether the disclosures related to receivables are at the correct amounts would specifically fall under the Accuracy and Valuation subcategory, which ensures that amounts disclosed are correct and fair.
  
  The PCAOB has different categories of assertions:
  – Existence or Occurrence: Assets or liabilities of the company exist at a given date, and recorded transactions have occurred during a given period.
  – Completeness: All transactions and accounts that should be presented in the financial statements are included.
  – Valuation or Allocation: Asset, liability, equity, revenue, and expense components are included in the financial statements at appropriate amounts.
  – Rights and Obligations: The company holds or controls rights to its assets, and liabilities are obligations of the company at a given date.
  – Presentation and Disclosure: The components of the financial statements are properly classified, described, and disclosed.
  
  In this case, number 12 would fall under the Presentation and Disclosure assertion. This category under the PCAOB ensures that the financial statement components are properly classified, described, and disclosed, including whether amounts are fairly stated.
  
  Thus, depending on whether you are referring to AICPA or PCAOB standards, the specific assertion can differ:
  AICPA: Accuracy and Valuation (an assertion under the category of Presentation and Disclosure)
  PCAOB: Presentation and Disclosure which may relate to Account Balances or Classes of Transactions.
  
  I hope this helps!
  
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