Auditors are tasked with the responsibility of investigating and creating a report as to whether fraud occurred or not. At the same time, auditors have the responsibility of explaining the financial status of an organization and to provide a reliable advice on the next course of action. Auditors have five internationally recognized assertions that dictate the trend with which the running of the operations are determined. Depending on the different findings that may have been obtained from the auditor’s report, the assertions are suitable in explaining and telling the direction of the auditor’s findings ( Sorokin, 2017) . They are suitable in helping in the preparation of a financial statement for any organization.
PCAOB Assertions
Existence and Occurrence
The assertion of existence or occurrence in the audit report seeks to address some of et fundamental issues in the audit report including such issues as the occurrence of the transactions that have been recognized in the financial statements. In reality, some of the transactions in the financial statements are not real, therefore, the auditor’s assertions seek to address the cases as to whether they occurred or not ( Sorokin, 2017) . Examples of the occurrence transactions in the financial statements include the salaries and wages that have been transacted. The assertions seek to determine the occurrence of some transactions such as to whether the recorded sales and purchases happened or not.
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Rights & Obligations
The assertions by the auditors over the rights and obligations seek to determine as to whether an entity has the right to use the recognized asset. The right and obligation assertions determine the viability as to whether a particular entity has the right ownership to one of the recognized assets that have been entered in the financial report. Some of the right and obligation entities that the financial report presents are the inventory balance and the inventories held by the auditor's behalf of another entity altogether (James, 2017). The legal ownership of the asset as entered in the report is also determined.
Completeness
The financial report should and must recognize all the assets and liabilities as well as the equity balances that are recorded in the financial statements. All the inventory units that were meant to be rerecorded are fully recognized in the financial statements. The inventory held by the third party on behalf of the audit is also recognized in the financial statements (James, 2017). The completeness of the financial report should check that all the transactions that were supposed to be recorded have duly been recorded and recognized.
Valuation or Allocation
The valuation assertions seek to assess all the assets, liabilities and equity balances to ensure that they are correctly valued. The assertion on valuation and allocation is to approve that all the inventory and have been recognized and lower costs have been realized. The valuation assertion equally determines as to whether the corporation is able to take the responsibility to recognize and pay the liabilities as identified.
Presentation and disclosure
This assertion dictates and determines the placement as to whether all the transactions were recorded in the right account. The financial statement should have a clear elaboration between the assets and liabilities. Therefore, the disclosure helps t determine the disclosure on some of the understandable users.
Auditors' Report
The auditor’s report serves to address many aspects of financial statements. Some of the major questions that the auditor’s report seeks to address includes but are not limited to the provision of assistance to the entity of the financial report. The user of the report may rely on the auditor’s opinion to adjust or to improve on their preparation process of the financial statements. The auditor’s report is also used by the various publicly-held corporations to attach it to their financial report before making it public for the securities exchange and trading and commission.
The auditor’s report is composed of seven distinct paragraphs that make it complete. The introductory paragraph that keenly identifies the financial report plus all its elements and parts that is up for investigation. The second paragraph is about the scope of the audit that indicates the extent to which the audit seeks to address and the matters to be covered by the audit ( Farzinfar, 2013) . The executive paragraph of the audit report does not provide an opinion. The opinion paragraph, on the other hand, reports on the financial situation of the firm as well as giving the financial health of the organization; these opinions are based on the Generally Accepted Accounting Principles (GAAP). The last second last paragraph is based on the auditor’s Name and the last one his signatures.
The four types of opinions that the auditor’s issue includes the unqualified Opinion that means the report is entirely clean. It is the typical clean bill of health kind of report that approves the operations. A qualified opinion is issued when the auditors cannot expressly issue a report on the unqualified report. Disclaimer opinion on the other hands means that the auditors cannot expressly give an opinion. Such cases as when the auditors fail to observed inventory in the place of the financial institution. Adverse opinions on its end are a case where there is a disagreement between the auditor and the organization’s management ( Farzinfar, 2013) . This disagreement could be due to the unavailability of the expressly available financial statements.
The materiality concept is a principle of the financial report that dictates that the auditor must disclose all the information that the auditor must be the issued to the audience ( Gul & Yang, 2013) . The materiality concept of the auditor’s report means that the materials could influence the decision of the financial users.
References
Farzinfar, A. (2013). Investigating the relationship between auditor’s opinion and stock return in the companies listed at Tehran stock exchange market. Management Science Letters , 3 (1), 81-90.
Gul, F. A., Wu, D., & Yang, Z. (2013). Do individual auditors affect audit quality? Evidence from archival data. The Accounting Review , 88 (6), 1993-2023.
James, R. D. (2017). Auditing and Assurance Services. Bookshelf Online: Auditing & Assurance Services
Sorokin, P. (2017). Social and cultural dynamics: A study of change in major systems of art, truth, ethics, law and social relationships . Routledge.
