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The following is a brief description of the financial statement assertions from PCAOB Auditing Standards Section AU 326, Evidential Matter: A. Existence or occurrence: Assets or liabilities of the entity exist at a given date (existence) or recorded transactions have occurred during a given period (occurrence). For example, management asserts that finished goods inventories in the balance sheet are available for sale. Similarly, management asserts that sales in the income statement represent the exchange of goods or services with customers for cash or other consideration. B. Completeness: Transactions and accounts that should be presented in the financial statements are so included. For example, management asserts that all purchases of goods and services are recorded and are included in the financial statements. Similarly, management asserts that notes payable in the balance sheet include all such obligations of the entity. C. Rights and obligations: Assets are the rights of the entity and liabilities are the obligations of the entity at a given date. For example, management asserts that amounts capitalized for leases in the balance sheet represent the cost of the entity’s rights to leased property and that the corresponding lease liability represents an obligation of the entity. D. Valuation or allocation: Asset, liability, equity, revenue, and expense components have been included in the financial statements at appropriate amounts. For example, management asserts that property is recorded at historical cost and that such cost is systematically allocated to appropriate accounting periods. Similarly, management asserts that trade accounts receivable included in the balance sheet are stated at net realizable value. E. Presentation and disclosure: Particular components of the financial statements are properly classified, described, and disclosed. For example, management asserts that obligations classified as long-term liabilities in the balance sheet will not mature within one year. Similarly, management asserts that amounts presented as extraordinary items in the income statement are properly classified and described. Match each of these five assertions with all of the input control goals that apply. Write a one or two-sentence explanation of each matching entry. Assertions A. Existence or occurrence B. Completeness C. Rights and obligations D. Valuation and allocation E. Presentation and disclosure Control Goals 1. Input validity (IV) 2. Input completeness (IC) 3. Input accuracy (IA)

BuyFind

Accounting Information Systems

11th Edition
Ulric J. Gelinas + 3 others
Publisher: Cengage Learning
ISBN: 9781337552127
BuyFind

Accounting Information Systems

11th Edition
Ulric J. Gelinas + 3 others
Publisher: Cengage Learning
ISBN: 9781337552127

Solutions

Chapter
Section
Chapter 9, Problem 4P
Textbook Problem

The following is a brief description of the financial statement assertions from PCAOB Auditing Standards Section AU 326, Evidential Matter:

  1. A. Existence or occurrence: Assets or liabilities of the entity exist at a given date (existence) or recorded transactions have occurred during a given period (occurrence). For example, management asserts that finished goods inventories in the balance sheet are available for sale. Similarly, management asserts that sales in the income statement represent the exchange of goods or services with customers for cash or other consideration.
  2. B. Completeness: Transactions and accounts that should be presented in the financial statements are so included. For example, management asserts that all purchases of goods and services are recorded and are included in the financial statements. Similarly, management asserts that notes payable in the balance sheet include all such obligations of the entity.
  3. C. Rights and obligations: Assets are the rights of the entity and liabilities are the obligations of the entity at a given date. For example, management asserts that amounts capitalized for leases in the balance sheet represent the cost of the entity’s rights to leased property and that the corresponding lease liability represents an obligation of the entity.
  4. D. Valuation or allocation: Asset, liability, equity, revenue, and expense components have been included in the financial statements at appropriate amounts. For example, management asserts that property is recorded at historical cost and that such cost is systematically allocated to appropriate accounting periods. Similarly, management asserts that trade accounts receivable included in the balance sheet are stated at net realizable value.
  5. E. Presentation and disclosure: Particular components of the financial statements are properly classified, described, and disclosed. For example, management asserts that obligations classified as long-term liabilities in the balance sheet will not mature within one year. Similarly, management asserts that amounts presented as extraordinary items in the income statement are properly classified and described.

Match each of these five assertions with all of the input control goals that apply. Write a one or two-sentence explanation of each matching entry.

Assertions

  1. A. Existence or occurrence
  2. B. Completeness
  3. C. Rights and obligations
  4. D. Valuation and allocation
  5. E. Presentation and disclosure

Control Goals

  1. 1. Input validity (IV)
  2. 2. Input completeness (IC)
  3. 3. Input accuracy (IA)

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