Part 5 Management Assertions (20 points) I. Conceptually, management makes assertions about the financial statements. (1) Define what is meant by management assertions; and, (2) Discuss how the concept of management assertions helps the auditor in auditing an entity's financial statements? II. Indicate the most applicable of each of the following assertions. Use only ONE letter for each item. Assertions about Classes of Transactions and Events and Related Disclosures, for the period under audit: A. Occurrence D. Cutoff B. Completeness E. Classification C. Accuracy 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. All sales that were recorded, took place. 2. The company actually owns inventory found in its warehouse. 3. Items on the company's inventory listing are in the company's warehouse. 4. Purchases shipped FOB destination, still in transit at the end of year 1, are excluded from inventory for year 1. 5. The auditor notes that the company determines properly the lower of cost or market" when determining the amount for inventory. Answers (USE ONLY ONE LETTER) 1. 2. 3. 5