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Dear tutor,
I’m confused about the assertions of transactions, account balances and presentations. Their assertions are all about occurrence, existence, accuracy, cut-off, valuation, etc. Are there any differences amoung assertions of these three categories? And when we refer to the assertions that we are going to confirm, do we need to say things like: confirmation of occcurrence of sales transactions? Also, when the examiner asks “list audit procedures for inventory”, do we list substantive procedures or test of controls? I feel like there is much overlap between these. Thank you so much!
1 Take completeness: it doesn’t matter whether you are talking about liabilities/assets, income/expense or completeness of disclosure.
2 Yes, you need to say what your assertion relates to otherwise the marker has not idea what you mean.
3 When you describe a procedure you should say which assertion you are trying to confirm. Assertions can be verified either by establishing that there are good controls operating (for example the assertion of valuation for receivables is helped by having an internal control system which insists that credit control checks are carried out before credit is extended) or by performing substantive tests (such as working out receivable days for comparison to the previous year, or by waiting until amounts are received after year end). Whether you use internal control evaluation or substantive tests depends on the question, but is there is no information given about internal controls you have to go down the substantive route.
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