What is Assertions? PPE, Inventory Assertions

Assertions in auditing refer to the claims made by the management regarding the financial statements of a company. These claims are then verified by the auditors during the audit process. Assertions are used by the auditors to assess misstatements and to form a conclusion about the fairness of the financial statements.

There are three types of assertions:

1. Transactions and events: These assertions are related to the occurrence, completeness, accuracy, cut-off, and classification of transactions.

2. Account balances: These assertions are related to the existence, rights and obligations, completeness, and valuation of account balances.

3. Presentation and disclosure: These assertions are related to the occurrence, rights and obligations, completeness, classification and understandability, and accuracy and valuation of presentation and disclosure.

In the context of PPE (Property, Plant, and Equipment) and Inventory, assertions could be:

• Existence: The assets (PPE and inventory) that the company claims to own do actually exist.
• Rights and obligations: The company has the legal rights to the claimed assets.
• Completeness: All assets that should have been recorded have been recorded.
• Valuation: The assets are recorded at the appropriate value.
• Presentation and disclosure: The assets are appropriately presented in the financial statements and disclosures are complete and understandable.