CPA AUD Assertions — Flashcards

CPA AUD assertions are management’s implicit or explicit claims regarding financial statement accuracy, used by auditors to assess risks and design procedures. The core assertions include Existence/Occurrence, Completeness, Valuation/Allocation, Rights & Obligations, and Presentation/Disclosure. These are categorized into transaction-level (income statement) and balance-level (balance sheet) assertions.

Key Assertions (COVE U/PERV)
Auditors typically use the acronym COVE U (or similar) to remember key assertions: 
Completeness: All transactions and accounts that should be presented are included.
Occurrence/Existence: Recorded transactions happened (Occurrence) and assets/liabilities exist (Existence).
Valuation/Allocation: Assets, liabilities, and equity are recorded at appropriate amounts.
Rights and Obligations: The entity holds rights to assets and owes the liabilities.
Understandability/Presentation/Classification: Information is properly classified and disclosed. 

Assertions by Type
Transactions (Income Statement): Occurrence, Completeness, Accuracy, Cut-off, Classification.
Balances (Balance Sheet): Existence, Rights & Obligations, Completeness, Valuation & Allocation.

Audit Techniques and Focus
Existence (Overstatement Risk): Vouch from accounting records back to supporting documents (e.g., Ledger -> Invoice).
Completeness (Understatement Risk): Trace from source documents to accounting records (e.g., Shipping Document -> Sales Journal).
Valuation: Involves checking accuracy and mathematical calculations.
Cut-off: Ensures transactions are recorded in the proper period.