Unit 3 Discussion Management Assertions 16 1 Under the Sarbanes Oxley Act of 2002, corporate officers and directors are personally responsible for the reliability of their company's financial statements Lawmakers believe that most cases of fraud and accounting dishonesty stem from corrupt corporate leaders Therefore, as a provision of the Act, Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs) must personally certify that the statements fairly represent company operations and comply with the provisions of the Securities Act of 1934 But what exactly does it mean to certify these documents Specifically, it means that management is asserting that the numbers in the financial statements signify the following as they pertain to transactions, and events (AICPA, 2013) Occurrence Transactions and events that have been recorded have occurred and pertain to the entity Completeness All transactions and events that should have been recorded have been recorded Accuracy Amounts and other data relating to recorded transactions and events have been recorded appropriately Cutoff Transactions and events have been recorded in the correct accounting period Classification Transactions and events have been recorded in the proper accounts Additionally, management is asserting the following about the account balances (AICPA, 2013) Existence Assets, liabilities, and equity interests exist Rights and obligations The entity holds or controls the rights to assets, and liabilities are the obligations of the entity Completeness All assets, liabilities, and equity interests that should have been recorded have been recorded Valuation and allocation Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded And finally, management asserts the following with regards to the presentation and disclosure of the financial statements (AICPA, 2013) Occurrence and rights and obligations Disclosed events and transactions have occurred and pertain to the entity Completeness All disclosures that should have been included in the financial statements have been included Classification and understandability Financial information is appropriately presented and described and disclosures are clearly expressed Accuracy and valuation Financial and other information are disclosed fairly and at appropriate amounts Instructions Read the following litigation release from the SEC website about the Lernout Hauspie Speech Products, Inc fraud case http www sec gov litigation litreleases lr17782 htm (Links to an external site ) Links to an external site If this link is unavailable, please use the following URL from the Securities and Exchange website http www sec gov litigation litreleases lr17782 htm (Links to an external site ) Links to an external site Discuss In your initial post, please discuss the following The Management assertions for Sales that the auditor should be most concerned with The Management assertions for Accounts Receivable that the auditor should be most concerned with Be sure to explain you the reasons for selecting each assertion Are there any other management assertions that the Learnout Hauspie top brass falsely put forth Respond to at least two classmates whose responses differ from your own Discuss why you agree or disagree with their responses Is there anything you can add or take away from their responses You must respond to questions and comments that your classmates make to your own information posted Your discussion postings will be graded on content, clarity, understanding, and depth as well as on your level of participation Again, it is important to stay current in discussion threads You should be an active, regular participant Please make sure that your replies are value added For more information about discussion grading criteria, visit the Undergraduate Discussion Participation Policies and Rubric page located in ECPI Resources References

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Unit 3 Discussion: Management Assertions 16 1 Under the Sarbanes-Oxley Act of 2002, corporate officers and directors are personally responsible for the reliability of their

Unit 3 Discussion: Management Assertions

Under the Sarbanes-Oxley Act of 2002, corporate officers and directors are personally responsible for the reliability of their company's financial statements. Lawmakers believe that most cases of fraud and accounting dishonesty stem from corrupt corporate leaders. Therefore, as a provision of the Act, Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs) must personally certify that the statements fairly represent company operations and comply with the provisions of the Securities Act of 1934.

But what exactly does it mean to certify these documents? Specifically, it means that management is asserting that the numbers in the financial statements signify the following as they pertain to transactions, and events: (AICPA, 2013)

Occurrence.Transactions and events that have been recorded have occurred and pertain to the entity.
Completeness.All transactions and events that should have been recorded have been recorded.
Accuracy.Amounts and other data relating to recorded transactions and events have been recorded appropriately.
Cutoff.Transactions and events have been recorded in the correct accounting period.
Classification.Transactions and events have been recorded in the proper accounts.

Additionally, management is asserting the following about the account balances: (AICPA, 2013)

Existence.Assets, liabilities, and equity interests exist.
Rights and obligations.The entity holds or controls the rights to assets, and liabilities are the obligations of the entity.
Completeness.All assets, liabilities, and equity interests that should have been recorded have been recorded.
Valuation and allocation.Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded.

And finally, management asserts the following with regards to the presentation and disclosure of the financial statements: (AICPA, 2013)

Occurrence and rights and obligations.Disclosed events and transactions have occurred and pertain to the entity.
Completeness.All disclosures that should have been included in the financial statements have been included.
Classification and understandability.Financial information is appropriately presented and described and disclosures are clearly expressed.
Accuracy and valuation.Financial and other information are disclosed fairly and at appropriate amounts.

Instructions:

Readthe following litigation release from the SEC website about the Lernout & Hauspie Speech Products, Inc. fraud case.http://www.sec.gov/litigation/litreleases/lr17782.htm

(Links to an external site.)

Links to an external site.

. If this link is unavailable, please use the following URL from the Securities and Exchange website:http://www.sec.gov/litigation/litreleases/lr17782.htm

(Links to an external site.)

Links to an external site.

Discuss -In your initial post, please discuss the following:

The Management assertions for Sales that the auditor should be most concerned with.
The Management assertions for Accounts Receivable that the auditor should be most concerned with. Be sure to explain you the reasons for selecting each assertion.
Are there any other management assertions that the Learnout & Hauspie top brass falsely put forth?

Respondto at least two classmates whose responses differ from your own. Discuss why you agree or disagree with their responses. Is there anything you can add or take away from their responses? You must respond to questions and comments that your classmates make to your own information posted.

Your discussion postings will be graded on content, clarity, understanding, and depth as well as on your level of participation. Again, it is important to stay current in discussion threads. You should be an active, regular participant. Please make sure that your replies are "value-added."

For more information about discussion grading criteria, visit theUndergraduate Discussion Participation Policies and Rubricpage located inECPI Resources.

References