Decomposition of the of the audited organization’s activity to the assertion level

Abstract

Importance: based on the requirements of International Standard on Auditing (ISA) 315 (Revised 2019), Identifying and Assessing the Risks of Material Misstatement, and ISA 330, The Auditor’s Responses to Assessed Risks, the auditors should assess the risks of material misstatements in the client’s financial statements. They should then perform further procedures that are consistent with the identified risks, at the financial statements level and at the assertion level. Due to the variety of applicable financial reporting frameworks and the unique characteristics of different entities, International Standards on Auditing do not provide specific guidance on how to decompose an audited entity’s operations into the components. In addition, the standards provide lists of assertions for balances and transactions, but there is no similar list for disclosures in financial statements that are not directly linked to account balances or operations. The subject of the study is to investigate the possibility of proposing a universal approach for addressing the fragmentation of activities of audited entities with different scales of operation and industry affiliations at the assertion level. Purpose: to propose a list of assertions for disclosures in financial statements that are not directly related to operations or account balances; to recommend a method for detailing the activities of an entity to the extent required for the purpose of auditing their complete general-purpose financial reports. Research design: the research was conducted based on the principles of consistency, complexity, and rationality. We used methods of analysis and synthesis, as well as modeling and deduction, to develop an approach to audit planning that took into account both International Standards on Auditing and existing scientific and practical developments in the domestic and foreign fields. Results: based on a comprehensive analysis of the advantages and disadvantages of existing approaches to segmenting audit, as well as taking into account the requirements of International Standards on Auditing, an integrated approach is recommended for decomposing an entity’s operations into assertion level for the purpose of auditing its complete set of general-purpose financial statements