Task 4

Assertions on the Financial Statements

Reconciling ledger accounting.

Here is the background information on your task

Before we can define the key audit areas we must also understand the various assertions that we consider when auditing financial statements. Assertions are the implicit or explicit claims by the management that we as auditors use when considering possible misstatements.

By the way: The key assertion, and the most important on the assets side, is occurrence. The most important assertion on the liabilities side is completeness. Review the full list of assertions in the resource document.

In our audit procedures, we distinguish between analytical audit procedures and checks on individual cases:
 
  • Analytical audit procedures involve the evaluation of financial information, including through analysis of how plausibly the data fits together: plausibility evaluations, investigations of fluctuations and discrepancies.
  • Checks on individual cases consist of detailed examinations of bookkeeping records. The classic example of this is checking receipts, where original documents are examined to establish whether a record was created correctly and in full upon when it was first entered.

Here is your task

Step 1: Trade receivables and inventories

Alongside property, plant and equipment, two other key audit areas were identified (trade receivables and inventories). Kevin needs your input in the table to complete the audit.

Complete the table using the risk assessment template. Enter the affected positions in column C (use the terms set out in the balance sheet and income statement). In column D, we enter the analytical audit procedures and checks on individual cases that we are planning to use to check that position.

Step 2: Stock inventory

In a regular audit, the subledgers are reconciled with the general ledger. New to you? No worries, find explanations in the resources to level up and provide Kevin afterwards with your findings.

You need to reconcile the client’s subledger with the general ledger and note your findings in the summary of uncorrected misstatements (SUM) template. Use the template of the task prior to complete the SUM at the end.

This experience is self-paced. But as mentioned, Kevin and your team are completing the audit in 1 hour and need your valuable input. We recommend you spend no more than that completing this task.

Resources to help you with the task

Resources for the task
 
Use the linked PDF’s for helpful guidance on completing your task.