PCAOB Assertions Discuss the five management financial statement assertions identified in the PCAOB Standards. Provide examples

Answer 1

Existence or Occurrence: Assertions about existence address whether assets and liabilities exist and assertions about occurrence address whether recorded transactions, such as sales transactions, have occurred.
Example: Management asserts that sales recorded in the income statement represent transactions in which the exchange of goods or services with customers for cash or other consideration had occurred.
Completeness: Assertions about completeness address whether all transactions and accounts that should be included in the financial statements are included.
Example: Management asserts that notes payable in the balance sheet include all such obligations of the organization.
Valuation or Allocation: Assertions about valuation or allocation address whether accounts have been included in the financial statements at appropriate amounts.
Example: Management asserts that trade accounts receivable included in the balance sheet are stated at net realizable value.
Rights and Obligations: Assertions about rights address whether assets are the rights of the organization, while assertions about obligations address whether liabilities are the obligations of the organization.
Example: Management asserts that amounts capitalized for leases in the balance sheet represent the cost of the entity's rights to leased property and that the corresponding lease liability represents an obligation of the entity.
Presentation and Disclosure: Assertions about presentation and disclosure address whether components of the financial statements are properly classified, described, and disclosed.
Example: Management asserts that obligations classified as long-term liabilities in the balance sheet will not mature within one year