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Auditing of Management Assertions

Last modified: April 22, 2020
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Every business demands accountability from its management. The claims made by the management in financial statements, explicitly or otherwise, are classified as management assertions or financial statement assertions. During the process of financial auditing, an auditor verifies them to know about the true state of the health of the business.

Auditors from Singapore auditing firm determines the accuracy of the management assertions by utilizing a number of audit tests. A dedicated professional team of auditors from SBS Consulting, a Singapore audit company, does the same task for their clients with exceptional accuracy.


Management Assertions

Statement like, “Net income of the company for year 1st April 2013 – 31st March 2014”, is a broad assertion and can be found in financial statements. During financial audit, a team of auditors from SBS Consultancy break broad assertions down into sets of detailed statements called as management assertions. Broadly speaking, these statements are of 3 types:

  • Income Statements Assertions or Transaction-level Assertions
  • Balance Sheet Assertions or Accounts Balance Assertions
  • Presentation and Disclosure

Income Statements Assertions or Transaction-level Assertions

  1. Occurrence: Management’s claim is that the transactions actually took place. Each transaction’s true amount was recorded.
  2. Completeness: Management asserts that all the business transactions, activities or events that the company was involved in, were recorded in full.
  3. Accuracy: Assertion is that the records presented depict full amounts of transactions undertaken by the company.
  4. Cutoff: Management claims that correct reporting period is used to record transactions.
  5. Classification: Assertion is that correct accounts in general ledger were used to record transactions.


 Balance Sheet Assertions or Accounts Balance Assertions

  1. Existence: Management announces that all the assets, liabilities and equity balances are properly accounted for.
  2. Rights and Obligation: Management asserts its rights to company’s assets and its responsibility towards the liability of the company.
  3. Completeness: Assertion is that company’s all reported liabilities, assets and equity balances have been recorded in full.
  4. Valuation and Allocation: Management claims that company’s all liabilities, assets and equity balances are entered in the balance sheet depicting appropriate values or amounts with proper adjustments.


Presentation and Disclosure

  1. Occurrence: Assertion is that the reported transactions have occurred as depicted.
  2. Rights and Obligation: Managements claim is that the reporting entity is responsible for the reported obligations and rights.
  3. Completeness: All transactions needing disclosure have been reported.
  4. Understandability: Assertion is that information is properly presented and easily understandable. Financial statements presents well described and properly presented information.
  5. Accuracy and Valuation: Management’s claim is that the information, including that related with financial matters of company is easily described and at appropriate values.

It is easy to understand that the management of a company is fully responsible for the preparation and presentation of financial statements of the company. Financial statements record assets, liabilities, incomes, expenses etc, in an attempt to give full picture about the current health of the company. A Singapore auditing firm, such as, SBS Consultancy then takes it from there for its clients and does the financial auditing. On verifying the assertions, presents a detailed report about the soundness of the company to the investors, regulators, management and creditors.

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