The following are various management assertions (a through m) related to sales and accounts receivable.
Management Assertion
a. All sales transactions have been recorded.
b. Receivables are appropriately classified as to trade and other receivables in the financial statements and are clearly described.
c. Accounts receivable are recorded at the correct amounts.
d. Sales transactions have been recorded in the proper period.
e. Sales transactions have been recorded in the appropriate accounts.
f. All required disclosures about sales and receivables have been made.
g. All accounts receivable have been recorded.
h. There are no liens or other restrictions on accounts receivable.
i. Disclosures related to receivables are at the correct amounts. j. Recorded sales transactions have occurred.
k. Recorded accounts receivable exist.
l. Sales transactions have been recorded at the correct amounts.
m. Disclosures related to sales and receivables relate to the entity.
Required
a. Explain the differences among management assertions about classes of transactions and events, management assertions about account balances, and management assertions about presentation and disclosure.
b. For each assertion, indicate whether it is an assertion about classes of transactions and events, an assertion about account balances, or an assertion about presentation and disclosure.
c. Indicate the name of the assertion made by management. (Hint: See Table 1 on page 154.)
TABLE 1 Management Assertions for Each Category of Assertions
Assertions About Classes of Transactions and Events | Assertions About Account Balances | Assertions About Presentation and Disclosure |
Occurrence-Transactions and events that have been recorded have occurred and pertain to the entity. | Existence—Assets, liabilities, and equity interests exist. | Occurrence and rights and obligations — Disclosed events and transactions have occurred and pertain to the entity. |
Completeness-All transactions and events that should have been recorded have been recorded. | Completeness—All assets, liabilities, and equity interests that should have been recorded have been recorded. | Completeness—All disclosures that should have been included in the financial statements have been included. |
Accuracy—Amounts and other data relating to recorded transactions and events have been recorded appropriately. | Valuation and allocation — Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation adjustments are appropriately recorded. | Accuracy and valuation — Financial and other information are disclosed appropriately and at appropriate amounts. |
Classification —Transactions and events have been recorded in the proper accounts. | Classification and understandability— Financial and other information is appropriately presented and described and disclosures are clearly expressed. | |
Cutoff —Transactions and events have been recorded in the correct accounting period. |
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| Rights and obligations—The entity holds or controls the rights to assets, and liabilities are the obligation of the entity. |
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