Question

ABC Corporation is in dire need of cash, their bankers, CITI Bank, notify them that the only way for them to borrow cash is by leaving a building owned by ABC as collateral. The management shows this property on their balance sheet as a long term asset. They are violating the following management assertion –

Completeness

Existence

None of the above

Occurrence

Answer 1

Answer-(C). None of the above.

Audit Assertions are the implicit or explicit claims and representations made by the management responsible for the preparation of financial statements regarding the appropriateness of the various elements of financial statements and disclosures.

Since ABC corporation is in in dire need of cash and banker suggest the way for them to borrow cash is leaving a building owned by ABC as collateral. The management show this property as long term asset in their balance sheet.

As of now this building is the Asset for the ABC Corporations so as of now it is not violating any of the Assertion. But when the same is given to the the bank as collateral then ABC should disclose this fact in the notes to their balance sheet. Violating this may be treated as violation of completeness.