How to test the completeness assertion for expenses?
The primary concern for expenses is that the company has not recorded all expenses in the financial statements. By not recording certain expenses, the company can inflate profit.
The audit team can trace invoices or cash disbursements to the general ledger (i.e. the search for unrecorded liabilities).
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How to test the occurrence assertion for revenue?
The primary concern regarding revenue is that the company is overstating revenue because why would a company understate revenue? Therefore, the audit team needs to test the occurrence/existence assertion to assess whether all of the sales recorded actually exist. The types of tests that can be performed will vary by company, but the audit team […]
What are the assertions for the transaction & events level?
The transaction & events assertions relate to the income statement and the activity throughout the year. The five key assertions include occurrence, completeness, accuracy, cutoff, and classification.
Do bank confirmations test the existence assertion?
Yes, bank confirmations are to verify that the cash exists in the bank account. Bank confirmations are sent to the 3rd party banks and the banks will respond and either verify the cash amount or they could say the cash does not exist! Most audit teams use confirmations.com to simplify the process of sending bank […]