Describe management assertions embodied in financial statements. Explain why auditors use them as a focal point of the audit.
Management assertions are essentially the claims that management makes to the auditor, in regards to the financial statements. These assertions are generally grouped into three categories, which include transactions assertions, account balances, and the presentation and disclosure of the financial statements. The transaction assertions are mainly relevant to the income statement. The management assertions hold that the transactions which flowed through to the income statement, from the accounting information system, are accurate, complete, properly categorized, and relevant to the current accounting period. This is based on having the proper controls in place, for transaction entry. As an example, a transaction assertion would hold that all transactions, including journal entries, check entries, etc. that were entered for wages and salaries are ...
This solution describes the management assertions that are embodied in financial statements in detail. This solution also explains why auditors use management assertions as a focal point in audits.