Audit Assertions: The Full List, With Tests for Each

Assertions are the claims management makes, by presenting the financial statements, about each number in them. "Accounts receivable: $2.4 million" claims that the receivables exist, that all of them are included, that the company owns them, and that $2.4 million is the right value.

The auditor's job is to get evidence for those claims. Assertions are how you decide which evidence: every risk you identify is tied to an assertion, and every procedure you design answers one or more of them.

The assertions under AU-C 315 and ISA 315

The AICPA (AU-C 315) and the IAASB (ISA 315, also CAS 315 in Canada) group assertions into two sets.

About classes of transactions and events (the income statement, mostly):

Assertion	The question it answers
Occurrence	Did the recorded transactions actually happen, and do they relate to the entity?
Completeness	Were all transactions that happened recorded?
Accuracy	Were the amounts recorded correctly?
Cut-off	Were transactions recorded in the right period?
Classification	Were they recorded in the right accounts?
Presentation	Are they grouped and described properly, with the disclosures required?

About account balances at period end (the balance sheet, mostly):

Assertion	The question it answers
Existence	Do the assets, liabilities and equity actually exist?
Rights and obligations	Does the entity own the assets and owe the liabilities?
Completeness	Are all assets, liabilities and equity that should be recorded included?
Accuracy, valuation and allocation	Are they recorded at the right amounts, with any valuation adjustments?
Classification	Are they in the right accounts?
Presentation	Are they aggregated, described and disclosed properly?

PCAOB assertions

For public company audits, PCAOB AS 1105 lists five broader assertions: existence or occurrence, completeness, valuation or allocation, rights and obligations, and presentation and disclosure. They cover the same ground as the list above in fewer categories.

Which test answers which assertion

Assertion	Typical procedures
Existence / occurrence	Vouch recorded items to support; confirmations; inventory observation; inspect fixed assets
Completeness	Trace source documents to the records; search for unrecorded liabilities; reconcile vendor statements
Accuracy / valuation	Recalculate; test pricing to invoices; review allowances and impairment; test foreign exchange
Cut-off	Test shipping and receiving documents either side of year end
Rights and obligations	Read contracts, title documents, loan agreements and lease terms
Classification	Review account coding of sampled items
Presentation	Disclosure checklist; agree notes to supporting schedules

The most common mistake is testing in the wrong direction. Vouching from the ledger to invoices gives evidence of occurrence, but it can never find an invoice that was never recorded. For completeness you have to start outside the ledger. Our guide to vouching vs tracing explains why.

Assertions and risk

Risks of material misstatement are assessed at the assertion level. For example:

• Revenue: the risk is usually occurrence and cut-off (overstatement, especially near year end).
• Accounts payable: the risk is usually completeness (understatement). See the accounts payable audit.
• Inventory: existence and valuation.
• Estimates such as allowances and warranties: valuation.

Where Warp fits

Warp runs the tests behind several of these assertions, including vouching for occurrence and accuracy, cut-off checks, and journal entry testing for management override. Each result links to its source document, so the working papers show exactly which assertion was tested and how. See also substantive testing.