In a financial audit, management assertions or financial statement assertions is the set of information that the preparer of financial statements (management) is providing to another party. Financial statements represent a very complex and interrelated set of assertions. At the most aggregate level, the financial statements include broad assertions such as "total liabilities as at 31 December are $50 million", "total revenue for the year is $9 million" and "net income for the year is $3 million".
Auditors decompose these broad assertions into a detailed set of statements referred to as management assertions, separated into three categories:
1. Transactions:
o Occurrence - the transactions actually took place
o Completeness - all transactions that should have been recorded have been recorded
o Accuracy - the transactions were recorded at the appropriate amounts
o Authorization - all transactions were properly authorized
o Cutoff - the transactions have been recorded in the correct accounting period
o Classification - the transactions have been recorded in the proper accounts
2. Accounts balances:
o Existence - assets, liabilities and equity balances exist
o Rights and Obligations - the entity holds or controls the rights to its assets and owes obligations to its liabilities
o Completeness - all assets, liabilities and equity balances that should have been recorded have been recorded
o Valuation and Allocation - assets, liabilities and equity balances are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded.
3. Presentation and disclosure:
o Occurrence - the transactions have occurred
o Rights and Obligations - the transactions pertained to the entity
o Completeness - all disclosures that should have been included in the financial statements have been included
o Classification and Understandability - financial statements are appropriately presented and described, and information in disclosures are clearly expressed.
o Accuracy and Valuation - financial and other information is disclosed fairly and at appropriate amounts.