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Material misstatement at financial and assertion level

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AA Exams › Material misstatement at financial and assertion level

  • This topic has 11 replies, 5 voices, and was last updated 9 years ago by Ken Garrett.
Viewing 12 posts - 1 through 12 (of 12 total)
  • Author
    Posts
  • August 7, 2015 at 7:41 pm #266133
    Ehsan
    Participant
    • Topics: 43
    • Replies: 420
    • ☆☆☆

    Dear Sir,

    Can you tell me what is meant by Financial level and at assertion level?

    I do get assertion means representation by management about the transaction in FS…. but what does it mean at Financial statment level?

    Are responses for both different?

    Regards

    August 9, 2015 at 8:51 pm #266450
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    Assertions: ACCA COVER: accuracy, completeness etc. See OT notes

    Financial statement level: all the assertions could be fine, but overall the FS give a misleading view. This is a higher level and more difficult to assess.

    August 10, 2015 at 4:40 am #266475
    tinaboy
    Member
    • Topics: 27
    • Replies: 126
    • ☆☆

    Therefore assertions are representations by management explicit or otherwise embodied in financial statements as used by the auditor to consider different types of potential misstatements.According to ISA 315 an auditor must use assertions for classes of transactions ,account balances ,presentation and disclosures to form the basis of assessment of risk of material misstatements.From here the auditor can now design and perform audit procedures or further procedures.Classes of transactions refers to profit or loss and account balances refer to SOFP. Assertions used include occurrence,completeness ,accuracy,cut-off ,classification,existence,valuation ,rights ad obligation.

    Sir to my understanding whilst some of these assertions apply to classes of translations ,account balances and presentation and discourses some are precisely for specific categories I stated.correct me if I am right ?

    August 10, 2015 at 7:40 am #266486
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    You are right.

    March 24, 2016 at 6:39 am #308059
    yskumar
    Member
    • Topics: 0
    • Replies: 4
    • ☆

    Sir may i know what are the examples that the assertions are ok, but financial statement gives misleading way

    March 24, 2016 at 7:52 am #308070
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    It is quite difficult to give an example because a misstatement at the FS level is really an opinion that overall the FS to not give a true and fair view.

    Perhaps one easy example is that there are going concern doubts. That does not relate to any balance or transaction that you could put your finger on, but if the going concern note were omitted then the FS could be misleading at a FS level.

    Similarly, when valuing construction contracts and taking profits there is judgement involved, and judgement means that you cannot definitely prove something is right or wrong. So there is a series of contracts, each of which might be recognising proits which on their own were not material, together the profits recognised might be misleading because of the way the add up.

    March 24, 2016 at 8:39 am #308072
    Anonymous
    Inactive
    • Topics: 0
    • Replies: 1
    • ☆

    @kengarrett said:
    You are right.

    March 25, 2016 at 2:29 am #308149
    yskumar
    Member
    • Topics: 0
    • Replies: 4
    • ☆

    Thank you so much sir

    March 25, 2016 at 4:13 am #308154
    yskumar
    Member
    • Topics: 0
    • Replies: 4
    • ☆

    Sir what is the difference between an engagement and auditor in simple terms

    March 26, 2016 at 4:41 pm #308347
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    An engagement is any type of work, such as an investigation into a fraud. An audit is one type of engagement.

    March 27, 2016 at 1:53 pm #308392
    yskumar
    Member
    • Topics: 0
    • Replies: 4
    • ☆

    Sir may i know the difference between assertion based engagement and direct reporting engagement with one example each in simple terms

    March 27, 2016 at 5:27 pm #308410
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10591
    • ☆☆☆☆☆

    I have not heard of an assertion based engagement. Different types of engagement are well explained here:

    https://www.accaglobal.com/gb/en/student/exam-support-resources/professional-exams-study-resources/p7/technical-articles/continue-to-be-rest-assured.html

    But this is an article for P7 so a bit too detailed for F8

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