Management Assertions Video - ExamPrep.ai CPA Review

Lesson: Management Assertions

This lesson delves into management assertions, exploring the different types of assertions and their importance in the audit process. It covers transaction level assertions, account balance assertions, and presentation and disclosure assertions, explaining how each one relates to different aspects of the financial statements. It also discusses the significance of obtaining a management representations letter from client management and the potential consequences of not receiving one. The lesson provides a thorough breakdown of each assertion type and highlights the role of auditors in testing the validity of these assertions through various audit tests and substantive procedures.

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Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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All right, we are in the end game now. We are going to go through the management assertions. Now, what we are seeing here, this is pulled directly from the AICPA's authoritative literature. We're going to see all the assertions. As I mentioned, we're going to kind of recap this and really drive it home because again, there are so many questions to be asked based on these assertions. So many SIMs and the SIMs that you'll see are going to be particularly confusing. At least in my experience, they're pretty confusing. And we're going to see procedures to be done for each assertion. Like I said, the best way to prepare you for this is just to see as many examples as possible. Management assertions, what we've been seeing, existence, occurrence, etc. These are all claims made by members of management regarding certain aspects of a business. Concept is primarily used in regard to the audit of a company's financial statements, where the auditors rely upon a variety of assertions regarding the business. The auditors are going to rely upon the fact that management says inventory is complete. But in addition to us relying on that, we're going to test that. That's again, reiterating the whole process. Definitely something that I've seen being confused many times all around. The auditors test the validity of these assertions by conducting a number of audit tests or substantive tests. Management assertions fall into the following three categories. As we've seen before, and we've seen in other lessons as well, we have our transaction level, our account balance, and our presentation and disclosure. There is a fair amount of duplication in the types of assertions across these three categories, as we'll see them broken out. However, each assertion type is intended for a

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