Management assertions

Meaning: Management assertions are the explicit or implicit claims management makes through the financial statements.

In Malay: Asersi pengurusan ialah dakwaan atau pernyataan pengurusan tentang maklumat dalam penyata kewangan.

Auditors use assertions to identify what could be wrong and select appropriate procedures to test it. mia.org.my

A. Assertions about transactions and events during the year

The following categories also cover related disclosures. mia.org.my

Assertion	Simple meaning	Illustrative example	Possible audit procedure
Occurrence	Recorded transactions actually happened and relate to the company.	A recorded RM10,000 sale represents a genuine sale to a customer.	Examine the invoice, customer order and delivery evidence.
Completeness	All transactions that should be recorded are included.	All goods delivered to customers have been recorded as sales.	Trace delivery documents to the sales records.
Accuracy	Transaction amounts and details are correctly recorded.	Ten units sold at RM100 each are recorded as RM1,000.	Recalculate the invoice and check the agreed price.
Cut-off	Transactions are recorded in the correct accounting period.	A sale meeting recognition requirements in January is not recorded in December.	Examine transactions and delivery terms around year-end.
Classification	Transactions are recorded in the appropriate accounts.	A delivery van purchase is recorded as an asset rather than a repair expense.	Examine invoices and the account used.
Presentation	Transactions and related disclosures are clearly and appropriately presented.	Revenue categories and related explanations are understandable.	Review the financial statements and relevant disclosures.

B. Assertions about account balances at year-end

These categories also cover related disclosures. standards.xrb.govt.nz

Assertion	Simple meaning	Illustrative example	Possible audit procedure
Existence	Recorded assets, liabilities and equity interests actually exist.	Inventory shown in the records is physically present.	Select items from the inventory listing and inspect them.
Rights and obligations	The company has rights to its assets and responsibility for its liabilities.	Goods held on behalf of a supplier are excluded from the company’s own inventory.	Examine purchase documents and consignment agreements.
Completeness	All balances that should be included have been recorded.	All amounts owed to suppliers at year-end are included.	Examine subsequent payments for unrecorded liabilities.
Accuracy, valuation and allocation	Balances are recorded at appropriate amounts, with necessary adjustments.	Obsolete inventory is written down where required.	Compare cost with net realisable value and inspect ageing reports.
Classification	Balances appear in the appropriate accounts or categories.	The portion of a loan due within the next year is classified appropriately.	Review the loan agreement and repayment schedule.
Presentation	Balances and related disclosures are clearly and appropriately presented.	Information about assets pledged as security is properly disclosed.	Examine agreements and compare them with the financial statement notes.

One simple inventory example

Management reports inventory of RM100,000. The auditor considers several different questions:

• Existence: Are the goods actually there?
• Rights: Do they belong to the company?
• Completeness: Has any inventory been left out?
• Valuation: Is RM100,000 the appropriate carrying amount?

Remember: Seeing the goods provides evidence of their existence, but does not by itself prove ownership or correct valuation. Different assertions require different supporting evidence.