Distinguishes between two types of misstatements: error and fraud.
illegal acts are defined as violations of laws or government regulations other than fraud. (violation of federal tax, or environmental laws.
Classify assertion into three catagories: Classes of transactions events for period under audit, classes of account balances at period end and, classes of presentations and disclosures.
requires that auditors obtain sufficient appropriate evidence to support the opinion issued.
are directly related to the accounting standards that are a part of the criteria that management used to record and disclose accounting information.
Auditors are only responsible for discovering DIRECT illegal acts, since these directly impact the financial statements.
The occurrence assertion concerns whether recorded transactions included in the financial statements actually occurred.
the assertion addresses whether all transactions that should be included in the financial statement are in fact included.
the accuracy assertion addresses whether the transaction have been recorded at correct amounts.
The classification assertion addresses whether transactions are recorded in the appropriate accounts.
the cutoff assertion addresses whether the transactions are record in the proper accounting period.
the existence assertion deals with whether assets liabilities and equity interest included in the balance sheet actually existed on the balance sheet date.
Completeness (Account Balance)
the assertion addresses whether all accounts and amounts that should be presented in the financial statements are in fact included.
Valuation and Allocation
The valuation and allocation assertion deal with whether assets, liabilities, and equity interest have been included in the financial statements at the appropriate amounts.
Rights and Obligations
this assertion addresses whether assets are the rights of the entity and whether liabilities are the obligations of the entity at a given date.
Occurrence and Rights and Obligations (Procedure and Disclosure)
this assertion addresses whether the disclosed events have occurred and are the rights and obligations of the entity.
this assertion deals with whether all required disclosures have been included in the financial statements.
Classification and Understandability
the assertion relates to whether amounts are appropriately classified in the financial statements and footnotes and whether the balance descriptions and related disclosures are understandable.
Phase I (Phases of a financial statement audit)
Plan and design approach.
Phase II (Phases of a financial statement audit)
perform test of controls and substantive test of transactions.
Phase III (Phases of a financial statement audit)
perform analytical procedures and test of details of balances.
Phase IV (Phases of a financial statement audit)
Complete the audit and issue an audit report.
Test of Controls
test effectiveness of the controls
Substantive tests of transactions
valuate clients recording of transactions by verifying the monetary amounts of transactions.
use comparisons and relationships to assess whether account balances or other data appear reasonable.
Test of details of balances
are specific procedures intended to test for monetary misstatements in the balances in the financial statements.