What are the focus of audits in sales and accounts receivable?

 Sales comprise a material figure in the statement of profit or loss. Auditors are seeking to obtain evidence about such assertions that relate to sales:

· Occurrence—sales that have been recorded or disclosed have occurred and are related to the company.

· Completeness—all sales that should have been recorded have been recorded, and all related disclosures that should have been included in the financial statements have been included.

· Accuracy—amounts and other data relating to recorded sales have been recorded appropriately, and related disclosures have been appropriately measured and described.

· Cutoff—sales have been recorded in the correct accounting period.

· Classification—sales have been recorded in the proper accounts.

· Presentation—sales are appropriately aggregated or disaggregated and clearly described, and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework.

Accounts receivable is a material item in the Statement of financial position. Auditors focus on obtaining evidence about following assertions:

· Existence—accounts receivable really exist.

· Rights and obligations—the company holds or controls the rights to accounts receivable.

· Completeness—accounts receivable that should have been recorded have been recorded, and all related disclosures that should have been included in the financial statements have been included.

· Accuracy, valuation and allocation—receivables been included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments have been appropriately recorded, and related disclosures have been appropriately measured and described.

· Classification—accounts receivable has been recorded in the proper accounts.

· Presentation— accounts receivable are appropriately aggregated or disaggregated and clearly described, and related disclosures are relevant and understandable in the context of the requirements of the applicable financial reporting framework.

Usually, auditors do not obtain evidence about all assertions listed above, they determine the relevant ones.

Why do auditors use Assertions?