What are Audit Assertions?

Definition: Audit assertions involve claims, which are implicitly or explicitly stated by a firm’s management, in relation to the precision of the elements of the financial statements and the disclosures included therein. In other words, these are things that management asserts are true about the financial statements that requires auditors to test the validity of them.

What Does Audit Assertions Mean?

What is the definition of audit assertions? Audit assertions fall under several classifications, including transactions, account balances, and disclosures. All assertions should be accurate, recorder within the proper accounts, and at their proper valuation. Furthermore, the assertions should verify that the entity owns its rights to the firm’s assets, and is obligated under the firm’s liabilities. All information included in the financial statements should be properly and comprehensibly presented.

Auditors must test the financial statements using the following management assertions:

  • Accuracy
  • Classification
  • Completeness
  • Cutoff
  • Existence
  • Occurrence
  • Rights and obligations
  • Understandability
  • Valuation

Let’s look at an example.


Mark is an accountant, and he is preparing the financial statements of a leading shipping company. The company’s manager has provided Mark with a series of audit assertions, which Mark should take into account to guarantee the good standing of the financial statements.

In particular, the manager of the shipping company has explicitly claimed that the transaction audit assertions regarding the assets, liabilities, income and equity of the firm should be disclosed in accordance with the International Financial Reporting Standards (IFRS Standards).

To crosscheck with the manager, Mark selects a sample of entries from the balance sheet, including inventory, long-term debt, and equity, and he traces all appropriate amounts recorded in the balance sheet. He calculates all the figures from the beginning, and he performs a control account to ensure that all the entities are rightfully included on the balance sheet, accurately valued, and in agreement with the measurement values.

He follows the same procedure to check the descriptions of the accounts recorded in the balance sheet as well as the disclosure for each transaction. Mark calculates the transactions to ensures their accuracy, and he read their description to ensure it is clear and comprehensible.

The procedure that Mark follows is a typical audit assertion procedure that relates to a firm’s transactions.

Summary Definition

Define Audit Assertions: An audit assertion means a management’s explicit or implicit claim that the company’s financial statements are representing the financial position of the company truthfully.

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