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[3] [4] Financial statement assertions provide a framework to assess the risk of material misstatement in each significant account balance or class of transactions. [5] Both United States and International auditing standards include guidance related to financial statement assertions, although the specific assertions differ.
For example, an auditor may: physically examine inventory as evidence that inventory shown in the accounting records actually exists (existence assertion); inspect supporting documents like invoices to confirm that sales did occur (occurrence); arrange for suppliers to confirm in writing the details of the amount owing at balance date as evidence that accounts payable is a liability (rights ...
The assertions are not individually assessed but quite often at the same time. For example, to ensure completeness of electricity expense, the auditor ensures the 12 months of payments were booked. Since the client may record the bills paid on a cash basis, electricity expense of a month of previous basis period might be entered in the current ...
This means an inventory observation on December 31 demonstrates the amount of inventory the company has on that date. Inquiry involves speaking to people, whether inside or outside the client's company, to learn specific information. Confirmation is a response to the auditor from third party roles about information regarding an assertion. [6]
The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the ...
While shrink (loss of inventory) helped, the analyst cautioned that higher fulfillment costs and excess inventory hurt margins, lowering the outlook. For the fourth quarter, the analyst sees flat ...
An inventory valuation allows a company to provide a monetary value for items that make up their inventory. Inventories are usually the largest current asset of a business, and proper measurement of them is necessary to assure accurate financial statements .
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