Part 2 Management Assertions (16 points)

I. Conceptually, management makes assertions about the financial statements. (1) Define, or explain, what is meant by management assertions. (2) How does the concept of management assertions help the auditor in auditing an entity's financial statements? Discuss.

II. Indicate the most applicable Assertion for each of the Items shown below [in the form of an assertion]. Use only ONE letter for each item.

Assertions about Classes of Transactions and Events and Related Disclosures, for the period under audit:

A. Occurrence B. Completeness C. Accuracy

D. Cutoff

E. Classification F. Presentation

Assertions about Account Balances and Related Disclosures, at the period end.

G. Existence J. Accuracy, Valuation and Allocation H. Rights and Obligations K. Classification

I. Completeness L. Presentation

Items:

1. Items in the company's warehouse can be found on the

inventory listing.

1. The company actually owns inventory found in its warehouse.
2. Purchases in transit at year-end shipped FOB destination
3. are properly excluded in the company's accounts.
4. Recorded sales actually took place.
5. Liabilities due in six months follow the accounting rules and
6. are shown on the company's balance sheet as long-term liabilities.

Part 2 II. Answers (USE ONLY ONE LETTER)

1. ____ 2. ____ 3. ____ 4. ____ 5. ____