The Fast Close Toolkit

CHAPTER TWENTY TWOFinancial Statement Assertions

INTRODUCTION: FINANCIAL STATEMENT ASSERTIONS, also referred to as management assertions, are the explicit or implicit assertions made by a company regarding the fundamental accuracy of information contained in its financial statements.

Financial statement assertions can be viewed as a company's official statement that the figures in its financial statements, such as the balance sheet and income statement, are a truthful presentation of its assets and liabilities in accordance with the applicable standards for recognition and measurement of such figures.

The Public Company Accounting Oversight Board (PCAOB) states that “in representing that the financial statements are presented fairly in conformity with the applicable financial reporting framework, management implicitly or explicitly makes assertions regarding the recognition, measurement, presentation, and disclosure of the various elements of financial statements and related disclosures.”ⁱ

The table in the following section provides the requirements for the financial statement assertion process.

FINANCIAL STATEMENT ASSERTION REQUIREMENTS AND APPLICATION

Existence/Occurrence: The assertion of existence is the assertion that the assets, liabilities, and shareholders' equity balances appearing on a company's financial statements actually exist as stated at the end of the accounting period that the fiscal statement covers. Application: Existence – balance sheet focused ...