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internal audit checklistIn a process of auditing, senior management indicates or asserts to auditors that finance statements conform to accepted principles of accounting. Assertions of financial statements help executives in top management ensure the accuracy of accounting reports. In the examination of corporate controls, financial statement assertions play a significant role.

Rules are established which accounting and finance staff members need to follow when going about their duties. Audit assertions enable auditors to carry out the testing activities on the internal guidelines, policies or controls of a business organization.

Assertions are related to tests of financial statements and include disclosure and presentation, obligations and right, occurrence or existence, occurrence or disclosure, obligations and right, allocation or completeness. Here is a course entitled SAP Audit Compliance which features SAP Security and SAP Audit Compliance- a Complete SAP Course.

In other words, audit assertions are what corporate auditors rely on to ensure that the data summaries are in line with norms in accounting and are accurate. Generally, these include international financial reporting standards and generally accepted principles of accounting.

Aside from these, auditors review the performance of corporate data according to auditing standards that are generally accepted. With that in mind, you might want to check out this course entitled Basics of Business Finance that teaches you basic accounting, using Excel to build financials and financial statement analysis.

Control Testing

Auditor specialists generally apply GAAS which stands for ‘generally accepted auditing standards’ to ensure that the procedures, processes and internal controls are ‘effective’ and ‘adequate.’ Effective control properly remedies deficiencies and adequate control explains in detail the involved steps in the process of making decisions and those that have to do with performing a task. Here is an article you might be interested in entitled SAP FICO: Enable Smoother and More Efficient Accounting Processes that will get the job done in half the time, accurately.

Control Knowledge

Auditors acquire knowledge about existing controls in a process or in areas being reviewed by having discussions with various experts like traders, tax specialists, risk managers and accountants. For example, auditors might meet with a manager of risk and ask him or her to explain what the calculation process is for the price of a bond option. By the way, here is a course entitled Financial Statements Made Easy that will teach you the basics of Cash Flow Statement, Balance Sheet and Income Statement and help you understand how these fit together.

Operating Environment Knowledge

Auditors understand the operating environment of an organization by reading corporate guidelines and policies, segment level standards and departmental procedures. Auditors can also acquire knowledge by reading the publications of the industry, reading the reports or prior years and inquiring from external auditors.

Valuation of Allocation

Tests of valuation test whether corporations properly appraise its liabilities or assets. For example, auditors might ask how its real estate assets are valued by Company W. Techniques of allocation can related how an entity of business allocates product costs, time periods or segments.

ASC 330-10-35 has made it a requirement that inventory balances can be valued at lower costs on the balance sheet. This assertion is tested by the auditory through the method of examining the cost of purchasing or producing the inventory versus the relative price of inventory sold.

It is also tested by conducting a test of the price, where the accountant audits the inventory production costs. Also, the auditor will examine the inventory during the physical inventory observations for signs of obsolescence. Inventory appearing dusty or old or shows signs of deterioration or spoilage should be the subject of higher scrutiny.


In financial reporting, completeness means that the financial statements of a business entity include 4 reports: a statement of the stockholder’s equity, a statement of cash flows, a statement of profit and loss and a balance sheet. In other words, an auditor is able to test the assertion of completeness during the process of observing inventory. While doing test counts, selections from the actual inventory shelves will be made and quantities verified in the accounting records of the company, known as a selection called ‘floor to sheet.’

Rights and Obligations

An auditor tests the rights and obligations of a company through putting a focus on its liabilities and assets. Economic resources the firm relies on for operation are its assets. A reviewer has to make sure that the firm has legal rights over them. They do this by transferring legal titles, reviewing payment transfers, receipts, original purchase orders and contracts. B

y paying attention to assertions of obligation, auditors ensure that debts of the corporation result from genuine agreements of borrowing. One example is that loan documents are reviewed by auditors to verify how accurate maturity dates, interest rates and debt amounts are.

This is a test done by an auditor to check what an entity of business owns or has legal obligations for what it owes, or its liabilities. For example, auditors might want a verification of a bond agreement to confirm the debt of Company ABC.

Existence or Occurrence

Occurrence or existence assertions help an auditor confirm that the items in a financial statement relate to the actual and not to the approximate or projected transaction. By doing this, corporate reviewers verify that revenues come from sources which are legitimate, such as gains on products of investment or sales of merchandise. It is also ensured by reviewers that a business has incurred actual expenses and this shows on its profits and loss statement.

Tests of existence check whether a liability or an asset can be physically verified. An auditor, for example, might want to verify existing warehouse stock inventory. A test of occurrence will inform auditors about the place and date a transaction of business actually occurred.

Presentation and Disclosure

Assertions of presentation and disclosure relate to the way financial data is presented by a company. To corporate reviewers, these indicate whether or not the firm has not left mediocre performance information out of the picture and that it is forthcoming with economic data. Audit assertions require that there is a specific way in which businesses present their financial accounts.

These include expenses, equity, revenues, liabilities and assets. It is on financial statements that the presentation depends. For example, finance managers need to show revenues separately from expenses in the income statement of a corporation. This assertion helps the head of the department present finance data according to the requirements of the Securities and Exchange Commission.

It is ensured by presentation that the financial statements of a business entity are reported according to accounting principles generally accepted and standards of the industry. Presentations that are accurate mean that there are reported accounts in ways specific to financial statements such as for the long or short term. To a financial report reader, disclosures provide information supplements.

Tests of Account Details

Auditors conduct detailed tests of account groups and accounts ensuring that the account balances of individuals agree with the balances on the financial statement. For instance, auditors might review individual accounts of policyholders verifying that the sums of these accounts do agree with reported amounts on the balance sheet of an insurance company.

Tests of Account Balances

When the control environment of a business entity is not effective or adequate, an auditor tests account balances. For example, when a specialist audit reviews the premium receivable balances of Insurance and Co, he or she might assess where there is proper computation in the premium amounts.

Hope this helps! Here is a course entitled SAP Audit that focuses on compliance and security for beginners in SAP, taught by Jay Dhruv.

Page Last Updated: February 2020

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