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Valuation and Allocation Assertion

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B. Explain why auditors translate audit assertions into specific audit objectives when
developing an audit program.

c. If you are auditing the existence and occurrence assertion, what specific audit objectives
should be accomplished by developing an audit program? Explain the purpose of each
audit objective.

d. If you are auditing the valuation or allocation assertion, what specific audit objectives
should be accomplished by developing an audit program? Explain the purpose of each
audit objective.

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This problem talks about why auditors translate audit assertions into audit objectives. .. It also explores these issues in the context valuation and allocation assertion.

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b. Explain why auditors translate audit assertions into specific audit objectives when
developing an audit program.
Auditors translate audit assertions into specific audit objectives when developing an audit program because of several reasons. First, the SAS 31 calls for auditors to set audit goals for every assertion for all important account balance or classes of transactions. On the other hand for more practical reasons, the auditor has to set objectives. Consider the example of valuation assertion, if an auditor confirms the balance of accounts receivables, there is evidence supporting the assertion of existence, however, this balance does not give any support to the contention that payments will actually be received from the customers. For this the auditor will have to set objectives relating to the aging of the current accounts receivable to evaluate if ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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