Question

Understanding the management assertions related to a specific control is an important factor in preparing the tests of controls. Using the assertions provided below, select the management assertion(s) that relates to the purpose of the controls in the table. (A management assertion may be selected once, more than once, or not at all.)

Management Assertions

(a) Existence or occurrence

(b) Completeness

(c) Rights and obligations

(d) Valuation or allocation

(e) Presentation and disclosure

(f) Authorization

(g) Cutoff

Purpose of Control	Management Assertion
To ensure that credit is approved before a sale is executed and service is provided or goods are shipped
To ensure that transactions shown as sales are properly classified
To ensure that when cash receipts are recorded they show cash that was actually received by the company and deposited
To ensure that cash receipts transactions are properly posted to the accounts receivable subsidiary ledger and general ledger
To ensure that all cash received by the company is deposited and recorded in the cash receipts journal and that amounts and details, including the date, are shown correctly
To ensure that sales transactions are recorded based on the correct dates

Answer 1

Purpose of control	Management Assertion	Details
To ensure that credit is --- are shipped	(f) Authorization	management wants prior authorization
To ensure that transactions shown --- classified	(e) Presentation and disclosure	management wants proper presentation and disclosure of sales
To ensure that when --- and deposited	(b) Completeness	management wants to ensure complete cash transaction.
To ensure that cash receipts --- general ledger	(d) Valuation or allocation	management wants cash receipts properly allocated to ledger.
To ensure that all cash --- shown correctly	(b) Completeness (d) Valuation or allocation	management wants to ensure complete allocation of cash received.
To ensure that sales -- correct dates	(a) Existence or occurrence	Ensuring recording on occurrence.