Chaptero01o-oAuditingoandoAssuranceoServices
Solution Manual For Auditing & Assurance Services 9t
o o o o o o o
oEdition by Timothy Louwers, Penelope Bagley
o o o o o
,Chaptero01o-oAuditingoandoAssuranceoServices
CHAPTERo01
AuditingoandoAssuranceoServices
LEARNINGoOBJECTIVES
Reviewo Multipleo Exercises,oProblems,o
Checkpoints Choice andoSimulations
1.oDefineoinformationoriskoandoexplainohowotheofi 1,o2,o3 29,o31,o38 65*
nancialostatementoauditingoprocessohelpsotoor
educeothisorisk,otherebyoreducingotheocostoofoc
apitaloforoaocompany.
2. Defineoandocontrastoassurance,oattestation, 4,o5,o6,o7,o8 23,o25,o28,o44, 60,o65*
andofinancialostatementoauditingoservices. 50
3. 9,o10,o11 36,o39,o40,o41,o45, 62,o63,o67,o68,o69
Describeoandodefineotheoassertionsothatoma 46,o47,o48,o49,o52,
nagementomakesoaboutotheorecognition,omeas 53,o54,o55,o57,o58,
urement,opresentation,oandodisclosureoofotheofi 59
nancialostatementsoandoexplainowhyoauditorso
useothemoasoaofocalopointoofotheoaudit.
4. 12 24,o37 61
Defineoprofessionaloskepticismoandoexplain
oitsokeyocharacteristics.
5. 13,o14 30,o42,o56 72
Describeotheoorganizationoofopublicoaccount
ingofirmsoandoidentifyotheovariousoservicesothato
theyooffer.
6. 15,o16,o17,o18 26,o27,o32,o34,o35 64,o66
Describeotheoauditsoandoauditorsoino
governmental,ointernal,oandooperationalo
auditing.
7. 19,o20,o21,o22 33,o43,o51 70,o71
Listoandoexplainotheorequirementsoforobeco
mingoaocertifiedopublicoaccountanto(CPA)oando
otherocertificationsoavailableotooanoaccounting
oprofessional.
(*)oItemorelatesotoomultipleolearningoobjectives
,Chaptero01o-oAuditingoandoAssuranceoServices
SOLUTIONSoFORoREVIEWoCHECKPOINTS
1.1 Businessoriskoisotheoriskothatoanoentityowillofailotoomeetoitsobusinessoobjectives.oWhenoassessingobusin
essorisk,oaoprofessionalomustoconsideroallopossibleothreatsotooanoentity‘sogoalsoandoobjectives.oSomeoillustr
ativeoexamplesoincludeotheoriskothat:o1)oitsoexistingocustomersowillostartobuyingoproductsooroservicesofromo
itsoprimaryocompetitors;o2)oitsoproductolinesowillobecomeoobsolete;o3)oitsotaxesowilloincrease;o4)okeyogover
nmentocontractsowillobeolost;o5)okeyoemployeesowilloleaveotheoentity;oandomanyootheroexamplesoexist.
1.2 Toohelpominimizeobusinessoriskoandotakeoadvantageoofootheroopportunitiesopresentedoinotoday‘socompetitiveo
businessoenvironment,odecisionomakersosuchoasochiefoexecutiveoofficerso(CEOs)odemandotimely,orelevant,oa
ndoreliableoinformation.oThereoareoatoleastofouroenvironmentaloconditionsothatoincreaseodemandofororeliableoi
nformation.oFirst,ocomplexityowhichoimpliesothatoeventsoandotransactionsoinotoday‘soglobalobusinessoenviron
mentocanobeocomplicated.oMostoinvestorsodoonotohaveotheoleveloofoexpertiseoneededotooproperlyoaccountoforo
complexotransactions.oSecondoisoremotenessowhichoimpliesothatodecisionomakersoareooftenoseparatedofromoc
urrentoandopotentialobusinessorelationshipsodueotoodistanceoandotime.oForoexample,oinvestorsomayonotobeoableo
toovisitodistantolocationsotoocheckoupoonotheiroinvestments.oThirdoisotime-
sensitivityowhichoimpliesothatoinotoday‘soeconomicoenvironment,oinvestorsoandootherousersoofofinancialostate
mentsoneedotoomakeodecisionsomoreorapidlyothanoeverobefore.oAsoaoresult,otheoabilityotoopromptlyoobtainohig
h-
qualityoinformationoisoessential.oFourthoisoaoconsequenceowhichoimpliesothatodecisionsomayoveryowelloinvolv
eosignificantoinvestments.o Asoaoresult,otheoconsequencesocanobeosevereoifoinformationocannotobeoobtained
1.3 Ofoallotheodifferentorisksodiscussedoinotheochapteroupotoothisopoint,oinformationoriskoisotheooneothatoisomostoli
kelyotoocreateotheodemandoforoindependentoandoobjectiveoassuranceoservicesoisoinformationoriskoorotheoprob
abilityothatotheoinformationocirculatedobyoanoentityowillobeofalseooromisleading.oBecauseotheoprimaryosourceo
ofoinformationoforoinvestorsoandocreditorsoisotheocompanyoitself,oanoincentiveoexistsoforothatocompany‘soman
agementotoomakeotheirobusinessooroserviceoappearotoobeobetterothanoitoactuallyomayobe,otooputotheirobestofootof
orward.oAsoaoresult,opreparersoandoissuersoofofinancialoinformationo(directors,omanagers,oaccountants,oandoo
theropeopleoemployedoinoaobusiness)omightobenefitobyogivingofalse,omisleading,oorooverlyooptimisticoinforma
tion.oThisopotentialoconflictoofointerestobetweenoinformationoprovidersoandousersowhichoprovidesotheounderl
yingobasisoforotheodemandofororeliableoinformation.
1.4 Theofouromajoroelementsoofotheobroadodefinitionoofoassuranceoservicesoare
Independence.o CPAsowantotoopreserveotheiroreputationoandocompetitiveoadvantageobyoalwaysopreservingoin
tegrityoandoobjectivityowhenoperformingoassuranceoservices.
Professionaloservices.oVirtuallyoalloworko performedobyoCPAsoisodefinedoaso ―professionaloservices‖oasolongoas
oitoinvolvesosome oelementoofojudgment obasedoonoeducationoandoexperience.
Improvingotheoqualityoofoinformationooroitsocontext.oTheo emphasisoisoono ―information,‖oCPAs‘otraditionaloare
aoofoexpertise.oCPAsocanoenhanceoqualityobyoassuringousersoaboutotheoreliabilityoandorelevanceoofoinformati
on,oandotheseotwoofeaturesoareocloselyorelatedotootheofamiliarocredibility-
lendingoproductsoofoattestationoandoauditoservices.o―Context‖oisorelevanceoinoaodifferentolight.oForoassuranceo
services,oimprovingotheocontextoofoinformationorefersotooimprovingoitsousefulnessowhenotargetedotooparticular
odecisionomakersoinotheosurroundingsoofoparticular o decisionoproblems.
Forodecisiono makers.oAsotheo ―consumers‖oofoassuranceo services,odecisiono makersoareotheobeneficiariesoofotheoa
ssuranceoservices.oDecisionomakersomayooro mayonotobeotheo ―client‖othatopaysotheo feeoando mayooro mayonotobeoo
neoofotheopartiesotooanoassertionoorootheroinformation,obutotheyopersonifyotheoconsumerofocusoofonewoandodiff
erentoprofessionalowork.
1.5 Anoassuranceoservicesoengagementoisoanyoassignmentothatoimprovesotheoqualityoofoinformation,ooroitsoconte
xt,oforodecisionomakers.oBecauseoinformationo(e.g.,ofinancialostatements)oareopreparedobyomanagersoofoanoen
tityowhoohaveoauthorityoandoresponsibilityoforofinancialosuccessoorofailure,oanooutsideromayobeoskepticalothatot
heoinformationotrulyoisoobjective,ofreeofromobias,ofullyoinformative,oandofreeofromomaterialoerror,ointentional
oor oinadvertent. o Theoservicesoofoanoindependent oauditorohelpsoresolve othoseodoubtsobecauseothe
, Chaptero01o-oAuditingoandoAssuranceoServices
auditor‘sosuccessodependsouponohisooroheroindependent,oobjective,oandocompetentoassessmentoofotheoinform
ationo(e.g.,otheoconformityoofotheofinancialostatementsowithotheoappropriateoreportingoframework).oTheoinde
pendentoauditor‘soroleoisotoolendocredibilityotootheoinformation;ohence,otheooutsiderowillolikelyoseekohisoorohero
independentoopinionoaboutotheofinancialostatements.
1.6 Anoattestationoengagementoiso―anoengagementoinowhichoaopractitioneroisoengagedotooissueoorodoesoissueoao
writtenocommunicationothatoexpressesoaoconclusionoaboutotheoreliabilityoofoaowrittenoassertionothatoisotheor
esponsibilityoofoanotheroparty‖o(SSAEo10,oATo101.01).oTooattestomeansotoolendocredibilityoorotoovouchoforot
heotruthooroaccuracyoofotheostatementsothatooneopartyomakesotooanother.oTheoattestofunctionoisoaotermoofteno
appliedotootheoactivitiesoofoindependentoCPAsowhenoactingoasoauditorsoofofinancialostatements.
1.7 Anoassuranceoserviceoengagementoisooneothatoimprovesotheoqualityoofoinformation,ooroitsocontext,oforodecisio
nomakers.o Thus,oanoattestationoserviceoengagementoisooneotypeoofoanoassuranceoservice.o Anotherowayoofothi
nkingoaboutotheoissueoisotoorememberothatotheofinancialostatementoauditoengagementoisooneotypeoofoanoattestat
ionoservice.oPleaseoseeoexhibito1.3oinotheotextowhichodepictsotheorelationshipoamongoassurance,oattestation,oa
ndoauditingoengagements.
1.8 Accordingotootheo AmericanoAccountingo Association,o ―Auditingoisoaosystematicoprocessoofoobjectivelyoobtaini
ngoandoevaluatingoevidenceoregardingoassertionsoaboutoeconomicoactionsoandoeventsotooascertainotheodegreeo
ofocorrespondenceobetweenotheoassertionsoandoestablishedocriteriaoandocommunicatingotheoresultsotoointerest
edousers.‖oInoeffect,oauditorsoaddoreliabilityotootheoinformationothatoisoprovidedotoointerestedousers.oOfocours
e,othisodefinitionoisofocusedoonoanoexternaloreportingocontext.oStudentsomayoalsoodiscussohowogovernmenta
loandointernaloauditorsooperateoasowell.
Inoresponseotoo ―Whatodooauditorsodo?‖ostudentso canorespondobyostatingo thato auditorso(1)oobtainoandoevaluateoe
videnceoaboutoassertionsomadeobyomanagementoaboutoeconomicoactionsoandoevents,o(2)oascertainotheodegre
eoofocorrespondenceobetweenotheoassertionsoandotheoappropriateoreportingoframework,oando(3)oissueoanoaudito
reporto(opinion).oStudentsocanoalsoorespondomoreogenerallyobyostatingothatoauditorsoessentiallyolendocredibil
ityotootheofinancialostatementsopresentedobyomanagement.
1.9 Financialoaccountingorefersotootheoprocessooforecording,oclassifying,osummarizing,oandoreportingoaboutoaoco
mpany‘soassets,oliabilities,ocapital,orevenues,oandoexpensesoinotheofinancialostatementsoinoaccordanceowithoth
eoapplicableofinancialoreportingoframeworko(e.g.,oGAAP).oInosoodoing,otheomanagementoteamoisomakingose
veraloassertionsoaboutotheofinancialostatements.oTheofinancialoaccountingoprocessoisotheoresponsibilityoofoth
eomanagementoteam.
Financialostatementoauditingorefersotootheoprocessowherebyoprofessionaloauditorsogatheroevidenceorelatedoto
otheoassertionsothatomanagementomakesoinothe ofinancialostatements,oevaluates otheoevidenceoandoconcludesoo
notheofairnessoofotheofinancialostatementsoinoaoreport.
Theyodifferobecauseoaccountantsoproduceotheofinancialostatementsoinoaccordanceowithotheoapplicableofinanci
aloreportingoframework.oAfterothisoisocomplete,ofinancialostatementoauditorsothenoperformoproceduresotooasce
rtainowhetherotheofinancialostatementsohaveobeenopreparedoinoaccordanceowithotheoapplicableofinancialoreporti
ngoframework.
1.10 TheotwoomajoroclassificationsoofoASBoassertionsowithoseveraloassertionsoinoeachoclassificationoare:o
AssertionsoAboutoClassesoofoTransactionsoandoEvents,oandoRelatedoDisclosures
Occurrenceoassertion:oTheoobjectiveoisotooestablishowithoevidenceothatotransactionsogivingoriseotooassets,oli
abilities,osales,oandoexpensesooccurred.oo Keyoquestionsoincludeo ―Didotheo recordedosaleso transactionsoreallyooc
cur?‖
Completenessoassertion:oTheoobjectiveoisotooestablishowithoevidenceothatoallotransactionsoofotheoperiodothatos
houldobeoareoincludedoinotheofinancialostatementso(includingofootnotes).oCompletenessoalsoorefersotooproperoi
nclusionoinofinancialostatementsoofoallorevenue,oexpense,oandorelatedodisclosures.oKeyoquestionsorelatedoto
Solution Manual For Auditing & Assurance Services 9t
o o o o o o o
oEdition by Timothy Louwers, Penelope Bagley
o o o o o
,Chaptero01o-oAuditingoandoAssuranceoServices
CHAPTERo01
AuditingoandoAssuranceoServices
LEARNINGoOBJECTIVES
Reviewo Multipleo Exercises,oProblems,o
Checkpoints Choice andoSimulations
1.oDefineoinformationoriskoandoexplainohowotheofi 1,o2,o3 29,o31,o38 65*
nancialostatementoauditingoprocessohelpsotoor
educeothisorisk,otherebyoreducingotheocostoofoc
apitaloforoaocompany.
2. Defineoandocontrastoassurance,oattestation, 4,o5,o6,o7,o8 23,o25,o28,o44, 60,o65*
andofinancialostatementoauditingoservices. 50
3. 9,o10,o11 36,o39,o40,o41,o45, 62,o63,o67,o68,o69
Describeoandodefineotheoassertionsothatoma 46,o47,o48,o49,o52,
nagementomakesoaboutotheorecognition,omeas 53,o54,o55,o57,o58,
urement,opresentation,oandodisclosureoofotheofi 59
nancialostatementsoandoexplainowhyoauditorso
useothemoasoaofocalopointoofotheoaudit.
4. 12 24,o37 61
Defineoprofessionaloskepticismoandoexplain
oitsokeyocharacteristics.
5. 13,o14 30,o42,o56 72
Describeotheoorganizationoofopublicoaccount
ingofirmsoandoidentifyotheovariousoservicesothato
theyooffer.
6. 15,o16,o17,o18 26,o27,o32,o34,o35 64,o66
Describeotheoauditsoandoauditorsoino
governmental,ointernal,oandooperationalo
auditing.
7. 19,o20,o21,o22 33,o43,o51 70,o71
Listoandoexplainotheorequirementsoforobeco
mingoaocertifiedopublicoaccountanto(CPA)oando
otherocertificationsoavailableotooanoaccounting
oprofessional.
(*)oItemorelatesotoomultipleolearningoobjectives
,Chaptero01o-oAuditingoandoAssuranceoServices
SOLUTIONSoFORoREVIEWoCHECKPOINTS
1.1 Businessoriskoisotheoriskothatoanoentityowillofailotoomeetoitsobusinessoobjectives.oWhenoassessingobusin
essorisk,oaoprofessionalomustoconsideroallopossibleothreatsotooanoentity‘sogoalsoandoobjectives.oSomeoillustr
ativeoexamplesoincludeotheoriskothat:o1)oitsoexistingocustomersowillostartobuyingoproductsooroservicesofromo
itsoprimaryocompetitors;o2)oitsoproductolinesowillobecomeoobsolete;o3)oitsotaxesowilloincrease;o4)okeyogover
nmentocontractsowillobeolost;o5)okeyoemployeesowilloleaveotheoentity;oandomanyootheroexamplesoexist.
1.2 Toohelpominimizeobusinessoriskoandotakeoadvantageoofootheroopportunitiesopresentedoinotoday‘socompetitiveo
businessoenvironment,odecisionomakersosuchoasochiefoexecutiveoofficerso(CEOs)odemandotimely,orelevant,oa
ndoreliableoinformation.oThereoareoatoleastofouroenvironmentaloconditionsothatoincreaseodemandofororeliableoi
nformation.oFirst,ocomplexityowhichoimpliesothatoeventsoandotransactionsoinotoday‘soglobalobusinessoenviron
mentocanobeocomplicated.oMostoinvestorsodoonotohaveotheoleveloofoexpertiseoneededotooproperlyoaccountoforo
complexotransactions.oSecondoisoremotenessowhichoimpliesothatodecisionomakersoareooftenoseparatedofromoc
urrentoandopotentialobusinessorelationshipsodueotoodistanceoandotime.oForoexample,oinvestorsomayonotobeoableo
toovisitodistantolocationsotoocheckoupoonotheiroinvestments.oThirdoisotime-
sensitivityowhichoimpliesothatoinotoday‘soeconomicoenvironment,oinvestorsoandootherousersoofofinancialostate
mentsoneedotoomakeodecisionsomoreorapidlyothanoeverobefore.oAsoaoresult,otheoabilityotoopromptlyoobtainohig
h-
qualityoinformationoisoessential.oFourthoisoaoconsequenceowhichoimpliesothatodecisionsomayoveryowelloinvolv
eosignificantoinvestments.o Asoaoresult,otheoconsequencesocanobeosevereoifoinformationocannotobeoobtained
1.3 Ofoallotheodifferentorisksodiscussedoinotheochapteroupotoothisopoint,oinformationoriskoisotheooneothatoisomostoli
kelyotoocreateotheodemandoforoindependentoandoobjectiveoassuranceoservicesoisoinformationoriskoorotheoprob
abilityothatotheoinformationocirculatedobyoanoentityowillobeofalseooromisleading.oBecauseotheoprimaryosourceo
ofoinformationoforoinvestorsoandocreditorsoisotheocompanyoitself,oanoincentiveoexistsoforothatocompany‘soman
agementotoomakeotheirobusinessooroserviceoappearotoobeobetterothanoitoactuallyomayobe,otooputotheirobestofootof
orward.oAsoaoresult,opreparersoandoissuersoofofinancialoinformationo(directors,omanagers,oaccountants,oandoo
theropeopleoemployedoinoaobusiness)omightobenefitobyogivingofalse,omisleading,oorooverlyooptimisticoinforma
tion.oThisopotentialoconflictoofointerestobetweenoinformationoprovidersoandousersowhichoprovidesotheounderl
yingobasisoforotheodemandofororeliableoinformation.
1.4 Theofouromajoroelementsoofotheobroadodefinitionoofoassuranceoservicesoare
Independence.o CPAsowantotoopreserveotheiroreputationoandocompetitiveoadvantageobyoalwaysopreservingoin
tegrityoandoobjectivityowhenoperformingoassuranceoservices.
Professionaloservices.oVirtuallyoalloworko performedobyoCPAsoisodefinedoaso ―professionaloservices‖oasolongoas
oitoinvolvesosome oelementoofojudgment obasedoonoeducationoandoexperience.
Improvingotheoqualityoofoinformationooroitsocontext.oTheo emphasisoisoono ―information,‖oCPAs‘otraditionaloare
aoofoexpertise.oCPAsocanoenhanceoqualityobyoassuringousersoaboutotheoreliabilityoandorelevanceoofoinformati
on,oandotheseotwoofeaturesoareocloselyorelatedotootheofamiliarocredibility-
lendingoproductsoofoattestationoandoauditoservices.o―Context‖oisorelevanceoinoaodifferentolight.oForoassuranceo
services,oimprovingotheocontextoofoinformationorefersotooimprovingoitsousefulnessowhenotargetedotooparticular
odecisionomakersoinotheosurroundingsoofoparticular o decisionoproblems.
Forodecisiono makers.oAsotheo ―consumers‖oofoassuranceo services,odecisiono makersoareotheobeneficiariesoofotheoa
ssuranceoservices.oDecisionomakersomayooro mayonotobeotheo ―client‖othatopaysotheo feeoando mayooro mayonotobeoo
neoofotheopartiesotooanoassertionoorootheroinformation,obutotheyopersonifyotheoconsumerofocusoofonewoandodiff
erentoprofessionalowork.
1.5 Anoassuranceoservicesoengagementoisoanyoassignmentothatoimprovesotheoqualityoofoinformation,ooroitsoconte
xt,oforodecisionomakers.oBecauseoinformationo(e.g.,ofinancialostatements)oareopreparedobyomanagersoofoanoen
tityowhoohaveoauthorityoandoresponsibilityoforofinancialosuccessoorofailure,oanooutsideromayobeoskepticalothatot
heoinformationotrulyoisoobjective,ofreeofromobias,ofullyoinformative,oandofreeofromomaterialoerror,ointentional
oor oinadvertent. o Theoservicesoofoanoindependent oauditorohelpsoresolve othoseodoubtsobecauseothe
, Chaptero01o-oAuditingoandoAssuranceoServices
auditor‘sosuccessodependsouponohisooroheroindependent,oobjective,oandocompetentoassessmentoofotheoinform
ationo(e.g.,otheoconformityoofotheofinancialostatementsowithotheoappropriateoreportingoframework).oTheoinde
pendentoauditor‘soroleoisotoolendocredibilityotootheoinformation;ohence,otheooutsiderowillolikelyoseekohisoorohero
independentoopinionoaboutotheofinancialostatements.
1.6 Anoattestationoengagementoiso―anoengagementoinowhichoaopractitioneroisoengagedotooissueoorodoesoissueoao
writtenocommunicationothatoexpressesoaoconclusionoaboutotheoreliabilityoofoaowrittenoassertionothatoisotheor
esponsibilityoofoanotheroparty‖o(SSAEo10,oATo101.01).oTooattestomeansotoolendocredibilityoorotoovouchoforot
heotruthooroaccuracyoofotheostatementsothatooneopartyomakesotooanother.oTheoattestofunctionoisoaotermoofteno
appliedotootheoactivitiesoofoindependentoCPAsowhenoactingoasoauditorsoofofinancialostatements.
1.7 Anoassuranceoserviceoengagementoisooneothatoimprovesotheoqualityoofoinformation,ooroitsocontext,oforodecisio
nomakers.o Thus,oanoattestationoserviceoengagementoisooneotypeoofoanoassuranceoservice.o Anotherowayoofothi
nkingoaboutotheoissueoisotoorememberothatotheofinancialostatementoauditoengagementoisooneotypeoofoanoattestat
ionoservice.oPleaseoseeoexhibito1.3oinotheotextowhichodepictsotheorelationshipoamongoassurance,oattestation,oa
ndoauditingoengagements.
1.8 Accordingotootheo AmericanoAccountingo Association,o ―Auditingoisoaosystematicoprocessoofoobjectivelyoobtaini
ngoandoevaluatingoevidenceoregardingoassertionsoaboutoeconomicoactionsoandoeventsotooascertainotheodegreeo
ofocorrespondenceobetweenotheoassertionsoandoestablishedocriteriaoandocommunicatingotheoresultsotoointerest
edousers.‖oInoeffect,oauditorsoaddoreliabilityotootheoinformationothatoisoprovidedotoointerestedousers.oOfocours
e,othisodefinitionoisofocusedoonoanoexternaloreportingocontext.oStudentsomayoalsoodiscussohowogovernmenta
loandointernaloauditorsooperateoasowell.
Inoresponseotoo ―Whatodooauditorsodo?‖ostudentso canorespondobyostatingo thato auditorso(1)oobtainoandoevaluateoe
videnceoaboutoassertionsomadeobyomanagementoaboutoeconomicoactionsoandoevents,o(2)oascertainotheodegre
eoofocorrespondenceobetweenotheoassertionsoandotheoappropriateoreportingoframework,oando(3)oissueoanoaudito
reporto(opinion).oStudentsocanoalsoorespondomoreogenerallyobyostatingothatoauditorsoessentiallyolendocredibil
ityotootheofinancialostatementsopresentedobyomanagement.
1.9 Financialoaccountingorefersotootheoprocessooforecording,oclassifying,osummarizing,oandoreportingoaboutoaoco
mpany‘soassets,oliabilities,ocapital,orevenues,oandoexpensesoinotheofinancialostatementsoinoaccordanceowithoth
eoapplicableofinancialoreportingoframeworko(e.g.,oGAAP).oInosoodoing,otheomanagementoteamoisomakingose
veraloassertionsoaboutotheofinancialostatements.oTheofinancialoaccountingoprocessoisotheoresponsibilityoofoth
eomanagementoteam.
Financialostatementoauditingorefersotootheoprocessowherebyoprofessionaloauditorsogatheroevidenceorelatedoto
otheoassertionsothatomanagementomakesoinothe ofinancialostatements,oevaluates otheoevidenceoandoconcludesoo
notheofairnessoofotheofinancialostatementsoinoaoreport.
Theyodifferobecauseoaccountantsoproduceotheofinancialostatementsoinoaccordanceowithotheoapplicableofinanci
aloreportingoframework.oAfterothisoisocomplete,ofinancialostatementoauditorsothenoperformoproceduresotooasce
rtainowhetherotheofinancialostatementsohaveobeenopreparedoinoaccordanceowithotheoapplicableofinancialoreporti
ngoframework.
1.10 TheotwoomajoroclassificationsoofoASBoassertionsowithoseveraloassertionsoinoeachoclassificationoare:o
AssertionsoAboutoClassesoofoTransactionsoandoEvents,oandoRelatedoDisclosures
Occurrenceoassertion:oTheoobjectiveoisotooestablishowithoevidenceothatotransactionsogivingoriseotooassets,oli
abilities,osales,oandoexpensesooccurred.oo Keyoquestionsoincludeo ―Didotheo recordedosaleso transactionsoreallyooc
cur?‖
Completenessoassertion:oTheoobjectiveoisotooestablishowithoevidenceothatoallotransactionsoofotheoperiodothatos
houldobeoareoincludedoinotheofinancialostatementso(includingofootnotes).oCompletenessoalsoorefersotooproperoi
nclusionoinofinancialostatementsoofoallorevenue,oexpense,oandorelatedodisclosures.oKeyoquestionsorelatedoto
