Balance Sheet and Potential Related Business
5-30 (Assertions)
1. The allowance for doubtful accounts is fairly presented in amount- Valuation and Allocation Assertion (Compare accounts receivable according to GAAP matching principle)
2. All accounts payable owed as of the balance sheet date are included in the financial statements- Completeness(Do the balances contain all transactions for the period)
3. All purchase returns recorded in the general ledger are valid- Existence/Occurrence(Do the recorded accounts represent valid liabilities at the balance sheet date)
4. There is a risk that purchases made in the last week of the month might be recorded in the following period- Completeness(Do the balances contain all transactions for the period)
5. The client may have factored accounts receivable- Right and Obligations 6. The client has used special-purpose entities to finance a building. Neither the building nor the debt is included in the financial statements- Completeness(Do the balances contain all transactions for the period)
7. A retail client values its inventory using the retail method of accounting- Valuation/Allocation(Are accounts valued in accord with GAAP)
8. A construction client uses the percentage of completion method for recognizing revenues- Existence/Occurrence(Do the recorded accounts represent valid liabilities at the balance sheet date)
9. A client has a defined benefit pension plan and does not have competent employees to write footnote disclosures- Presentation/Disclosure(Is the account balance properly presented and disclosed)
10. A client acquired a subsidiary company and paid a high amount of goodwill when the stock market, and resulting values, were at all-time highs- Valuation/Allocation(Are accounts valued in accord with GAAP)
11. A client financed the acquisition of assets using preferred stock that pays a 3 percent dividend and must be redeemed from the shareholders next year- Presentation/Disclosure(Is the account balance properly presented and disclosed)
1. The allowance for doubtful accounts is fairly presented in amount- Valuation and Allocation Assertion (Compare accounts receivable according to GAAP matching principle)
2. All accounts payable owed as of the balance sheet date are included in the financial statements- Completeness(Do the balances contain all transactions for the period)
3. All purchase returns recorded in the general ledger are valid- Existence/Occurrence(Do the recorded accounts represent valid liabilities at the balance sheet date)
4. There is a risk that purchases made in the last week of the month might be recorded in the following period- Completeness(Do the balances contain all transactions for the period)
5. The client may have factored accounts receivable- Right and Obligations 6. The client has used special-purpose entities to finance a building. Neither the building nor the debt is included in the financial statements- Completeness(Do the balances contain all transactions for the period)
7. A retail client values its inventory using the retail method of accounting- Valuation/Allocation(Are accounts valued in accord with GAAP)
8. A construction client uses the percentage of completion method for recognizing revenues- Existence/Occurrence(Do the recorded accounts represent valid liabilities at the balance sheet date)
9. A client has a defined benefit pension plan and does not have competent employees to write footnote disclosures- Presentation/Disclosure(Is the account balance properly presented and disclosed)
10. A client acquired a subsidiary company and paid a high amount of goodwill when the stock market, and resulting values, were at all-time highs- Valuation/Allocation(Are accounts valued in accord with GAAP)
11. A client financed the acquisition of assets using preferred stock that pays a 3 percent dividend and must be redeemed from the shareholders next year- Presentation/Disclosure(Is the account balance properly presented and disclosed)