What assertion is related to each issue?
1. The allowance for doubtful accounts is a fair amount.
2. All liabilities owed as of year end are included in the financial statements.
3. All purchase returns are valid.
4. Purchases during the last week of the year might be recorded after year end.
5. Accounts receivable has been factored.
6. Special-purpose entities financed a building and neither the asset or the related debt is mentioned in the financial statements.
7. Retail method of accounting is used to value items.
8. Percentage of completion method is used..
9. A client does not have trained employees to write footnote disclosures for their benefit footnote.
10. A subsidiary was purchased when stock prices were at all time highs and so goodwill may be impaired.
11. The firm issued redeemable preferred stock that must be redeemed next year.
Assertions about account balances:
• Existence--assets, liabilities, and equity interests exist.
• Completeness--all assets, liabilities and equity interests have been recorded.
• Rights and obligations--the entity holds or controls the rights to assets and liabilities are the obligations of the entity.
• Valuation and allocation--assets, liabilities, equity interests are included at appropriate amounts.
Assertions about transactions and events:
• Occurrence—transactions and events that have been recorded have occurred and pertain to the ...
Your tutorial is 455 words and includes a list of all the assertions by the three categories so all the potential assertions can be studied. The primary assertion is noted.
Audit Assertions: Identify the Assertion for the Issues Listed
(Assertions) In planning the audit of a client's financial statements, an auditor identified
the following issues that need audit attention.
1. The allowance for doubtful accounts is fairly presented in amount.
2. All accounts payable owed as of the balance sheet date are included in the financial
3. All purchase returns recorded in the general ledger are valid.
4. There is a risk that purchases made in the last week of the month might be recorded in
the following period.
5. The client may have factored accounts receivable.
6. The client has used special-purpose entities to finance a building. Neither the building
nor the debt is included in the financial statements.
7. A retail client values its inventory using the retail method of accounting.
8. A construction client uses the percentage of completion method for recognizing revenues.
9. A client has a defined benefit pension plan and does not have competent employees to
write footnote disclosures.
10. A client acquired a subsidiary company and paid a high amount of goodwill when the
stock market, and resulting values, were at all-time highs.
11. A client financed the acquisition of assets using preferred stock that pays a 3 percent
dividend and must be redeemed from the shareholders next year.
Identify the assertion for items 1 through 11 above.View Full Posting Details