Management Assertions

Management assertions are claims made by members of management regarding certain aspects of a business.

The concept is primarily used concerning the audit of a company’s financial statements, where the auditors rely upon a variety of assertions regarding the business. The auditors test the validity of these assertions by conducting several audit tests.

Management assertions fall into the following 3 classifications;

Management Assertions

Transaction-Level Assertions

The following five items are classified as assertions related to transactions, mostly regarding the income statement:

  1. Occurrence

    All transactions and events that have been recorded have occurred and pertain to the entity.

  2. Completeness

    All transactions and events that should have been recorded.

  3. Accuracy

    Amounts and other data relating to recorded transactions and events have been recorded appropriately.

  4. Cutoff

    Transactions and events have been recorded in the correct accounting period.

  5. Classification

    Transactions and events have been recorded in the proper accounts.

Account Balance Assertions

The following four items are classified as assertions related to the ending balances in accounts, and so relate primarily to the balance sheet:

  1. Existence

    Assets, liabilities and equity interests exist.

  2. Rights and obligations

    The entity holds or controls the rights to assets, and liabilities are the obligations of the entity.

  3. Completeness

    All assets, liabilities, and equity interests that should have been recorded.

  4. Valuation and allocation

    Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded.

Presentation and Disclosure Assertions

The following five items are classified as assertions related to the presentation of information within the financial statements, as well as the accompanying disclosures:

  1. Occurrence and rights and obligations

    Disclosed events and transactions have occurred and pertain to the entity.

  2. Completeness

    All disclosures that should have been included in the financial statements have been included.

  3. Classification and understandability

    Financial information is appropriately presented and described and disclosures are clearly expressed.

  4. Accuracy and valuation

    Financial and other information are disclosed fairly and at appropriate amounts.