What is meant by Assertion in Auditing? List the assertions about classes of transaction and events?

There are 5 main Assertions :

1- Presentation

2- Existence & Occurrence

3- Rights & Obligations

4- Completeness

5- Valuation

In Auditing,  a company's financial statements, where the auditors rely upon a variety of assertions regarding the business. The auditors test the validity of these assertions by conducting a number of audit tests;

The following five items are classified as assertions related to transactions, mostly in regard to the income statement:

• Accuracy. The assertion is that the full amounts of all transactions were recorded, without error.
• Classification. The assertion is that all transactions have been recorded within the correct accounts in the general ledger.
• Completeness. The assertion is that all business events to which the company was subjected were recorded.
• Cutoff. The assertion is that all transactions were recorded within the correct reporting period.
• Occurrence. The assertion is that recorded business transactions actually took place.

Account balance assertions. The following four items are classified as assertions related to the ending balances in accounts, and so relate primarily to the balance sheet:

• Completeness. The assertion is that all reported asset, liability, and equity balances have been fully reported.
• Existence. The assertion is that all account balances exist for assets, liabilities, and equity.
• Rights and obligations. The assertion is that the entity has the rights to the assets it owns and is obligated under its reported liabilities.
• Valuation. The assertion is that all asset, liability, and equity balances have been recorded at their proper valuations.

Presentation and disclosure assertions. The following five items are classified as assertions related to the presentation of information within the financial statements, as well as the accompanying disclosures:

• Accuracy. The assertion is that all information disclosed is in the correct amounts, and which reflect their proper values.
• Completeness. The assertion is that all transactions that should be disclosed have been disclosed.
• Occurrence. The assertion is that disclosed transactions have indeed occurred.
• Rights and obligations. The assertion is that disclosed rights and obligations actually relate to the reporting entity.
• Understandability. The assertion is that the information included in the financial statements has been appropriately presented and is clearly understandable.

Assertions or management assertions in audit or auditing simply means what management claims. For example, if a management states that internal controls are effective then it is a claim or assertion made by management.

Assertions and International Standard on Auditing (ISA)

ISA points out that in preparing financial statements make direct or indirect assertions regarding the recognition, measurement, presentation of elements of financial statements and disclosures made in the financial statements. If these assertions are correct then financial statements will automatically be reliable.

 ISA categorizes the different assertions in three categories which are further classified as follows: 

1.       Assertions about classes of transactions:

A. Occurrence: transactions and events so recorded in the financial statements actually occurred and relates to the same period.

B.Completeness: all such transactions and events that required recording have been recorded

 C.Accuracy: transactions and ancillary information have been recorded with accurate amounts

 D.Cutoff: only those transactions and events have been recorded that pertains to the accounting period under consideration

 F.Classification: transactions and events have been recorded in the related accounts properly