## Assertions
### Definition
Assertions are representations by management, explicit or implicit, that are embodied in the financial statements. The auditor uses them to identify the different types of potential misstatements that may occur.
### Key characteristics
- Can be positive ("This asset exists") or negative (absence of something, e.g., no contingent liability exists).
- Can be explicit (directly stated in the notes) or implicit (inherent in presenting an item).
- Every figure and disclosure in the financial statements carries multiple assertions simultaneously.
### Why assertions matter
Audit procedures are designed to address specific assertions. The direction and nature of testing must match the assertion being tested (see Relevance topic).
### Common assertion categories
#### For classes of transactions and events (Income Statement items)
| Assertion | What it means |
|---|---|
| Occurrence | Recorded transactions actually happened |
| Completeness | All transactions that should be recorded have been recorded |
| Accuracy | Amounts and data are recorded correctly |
| Cutoff | Transactions are recorded in the correct period |
| Classification | Transactions are in the right accounts |
#### For account balances (Balance Sheet items)
| Assertion | What it means |
|---|---|
| Existence | Assets/liabilities actually exist at period end |
| Rights and Obligations | Entity owns assets / owes liabilities |
| Completeness | All balances that should be recorded are recorded |
| Valuation and Allocation | Balances are at appropriate amounts |
#### For presentation and disclosure
| Assertion | What it means |
|---|---|
| Occurrence and rights/obligations | Disclosed events have occurred |
| Completeness | All required disclosures are included |
| Classification and understandability | Information is clearly presented |
| Accuracy and valuation | Disclosures are accurate and at appropriate amounts |