Assertions by Mgt (A) (MPCOVER)

M - Measurement Transaction is property recorded accurately at their appropriate amounts and no

error.

P - Presentation & All items are property classified and disclosed

disclosure
C - Completeness transactions supposed to be recorded has been recorded

O - Occurrence Transactions actually took place during the year and related to entity

V - Valuation All assets and liabilities and equity balance have been property valued.

E - Existence Assets and liabilities exists at given date.

R - Right and Obligation Entity has right to Asset and liability recognized in F.S is entity’s obligation
 Financial Statements divided into 2 parts

Balance Sheet Items Profit & loss Items

Assets & Liabilities Income & Expense
 
We need to address following assertions We need to address following assertions by
 management
MP COVER 
MP COVER
 Assertions
What we will do??
Addressed
1. Presentation & Disclosure  Check such item is properly presented and
disclosed as per Schedule III (you can also mention
more specifically)
2. Completeness  Check Proper Entry/record / register / books made for it

3. Valuation  Check whether it is properly valued (mention

4. Existence
5. Right & Obligation
valuation)
 By physical verification check whether it exist on
Balance Sheet Date
 Check documents than mention right of ownership
or obligation such as . . . .
 Share Capital
1. Existence - Tally opening balance through previous years balance sheet
- For transactions during year:
o Check whether PUC within limits of Authorised capital
o Check copy of resolution / minutes to confirm
o Obtain copy of SH-7, PAS-3 with MCA

2. Records / - Check Share Capital Register

Register - Check Bank Book / Cash Book

3. Valuation Check whether properly valued with share capital only entered as Face Value & amount of
premium / Discount properly adjusted in respective accounts

4. Rights /
Tally shares issued / allotted with register of members
Obligations
 Share Capital
5. Presentation & - Check whether properly presented & disclosed as per Schedule III (Part 1)
Disclosure - Properly classified in
(can also mention a) Balance at beginning of period
b) Changes during the year
where it is recorded c) Balance at end of period
in Balance Sheet) - Disclose shareholders holding atleast 5% shares

6. Other
Important
i. Law: Check all provisions of Companies Act has been complied
Points
ii. Cut-off Procedure: check whether cut-off procedure is followed & transaction of
(Law / Cut-off
one period is not recorded in other year & vice versa
Procedure / AS /
other points)
 Reserves & Surplus
1. Existence - Tally opening balance through previous years balance sheet
- Current year transactions:
o Trace movement of profit / loss as per P&L
o Check resolutions for any adjustments & minutes of meeting.

2. Records /
Check from any registers maintained for it for completeness
Register
3. Valuation Check whether it is properly valued

4. Rights /
Obligations
 Reserves & Surplus
5. Presentation & - As per Schedule III (Part 1)
Disclosure - Proper sub-classification made into different types of reserves
(can also mention - Check disclosures
i. Balance in beginning of period
where it is recorded ii. Changes during the year
in Balance Sheet) iii. Total P&L
iv. Dividend
v. Transfer to retained earnings
vi. Balance in end of period

6. Other Important
Points i. Law: Check whether respective laws specifically for reserve in Companies Act
(Law / Cut-off has been complied.
Procedure / AS / other ii. Cut-off Procedure: check whether cut-off procedure is followed & transaction
points) of one period is not recorded in other year & vice versa
iii.AS: Check whether AS 4 complied
 Borrowings (Loans/ Trade Payables/ other Current Liability)
1. Existence - Tally opening balance through previous years balance sheet
- For current year Borrowing check :
o Resolution / minutes copy
o Obtain External confirmation
o Check NOC for released debt
- Tally closing balance properly calculated

2. Records /
Loan Register / Lender’s register / Borrowings register
Register
3. Valuation - Ensure no unrecorded borrowings
- Recorded in correct accounts
- Recording method – consistently applied
- Check due dates for proper classification into short term / long term

4. Rights / - Check lending agreement / hire purchase agreement

Obligations - Check details of loan
 Borrowings (Loans/ Trade Payables/ other Current Liability)
5. Presentation & - Check whether properly classified as per Schedule III as
Disclosure (a) Bond / Debenture (b) term loan (bank / RP) (c) Deferred payment liability
(can also mention (d) deposits (e) from RP (f) other loans & advances
where it is recorded - Installments due in next 12 months properly disclosed
in Balance Sheet) - Contingent liability properly disclosed
- Check long term liability properly disclosed as
(a) Secured / Unsecured (b) nature if security (c) guarantee by Director
(d) terms of repayment
- Disclose:- (a) period (b) amount in case of default

6. Other i. Law: a) ensure sec. 73 to 76 of deposits complied

Important b) ensure Sec. 179 / 180 / 185 / 186 complied
Points ii. AS-11: Complied if foreign currency loan (closing currency rate used)
(Law / Cut-off iii.Cut-off Procedure
Procedure / AS / iv.Report if loans & advances shown as deposits U/s 143(1)
other points) v. Report in CARO
 Trade Receivables / Debtors
1. Existence - Obtain external confirmation
- Obtain period end aging report
- Check proper appropriation of money

2. Records /
Check debtor register / cash book / bank book / sales register
Register
3. Valuation - Check properly valued
- All money received properly adjusted
- Sales return considered
- Discount / incentives properly adjusted
- Bad debts properly accounted & authorised

4. Rights /
Sales invoice / copy of agreement / transport shipping documents
Obligations
 Trade Receivables / Debtors
5. Presentation &
Disclosure - Ensure split: more than 6 months, less than 6 months from due date and not
(can also mention invoice
where it is recorded - Properly disclosed as secured / unsecured / doubtful
in Balance Sheet)

6. Other Important i. Law: ensure section 189 complied, if RTP.

Points ii. Cut-off Procedure: ensure goods dispatched & not lying with company as on
(Law / Cut-off Balance Sheet Date if accounted this year & vice versa
Procedure / AS / iii.AS: AS-11 complied if foreign currency trade
other points) iv.ARP : Check bad debts – sales ratio to ensure reasonableness
 Cash & Cash Equivalent
(Cash in hand, Balance in current A/c, CC A/c, FD, Cheques in hand)
1. Existence - Surprise check in presence of cashier
- Check posting from rough cash book to fair cash book
- Check BRS
- External confirmation from bank for balance

2. Records /
Cash book / bank book / FA register
Register
3. Valuation Check properly recorded

4. Rights / Check cash payment slip / cash repayment slip / daily cash book / bank statement / bank
Obligations slips
 Cash & Cash Equivalent
(Cash in hand, Balance in current A/c, CC A/c, FD, Cheques in hand)
5. Presentation & - As per Schedule III (part I)
Disclosure - It should be properly classified into
(can also mention a) Balance with bank
b) Cheque in hand
where it is recorded
c) Cash in hand
in Balance Sheet) d) Others
- Earmarked balance with bank (eg. Unpaid dividend) separately stated
- Bank deposits with more than 12 months maturity separately stated

6. Other i. AS-11: foreign currency restated at closing currency rate

Important ii. Cut-off Procedure followed
Points iii.ARP: perform cash sensitive analysis for summary of receipt / payment each
(Law / Cut-off month and analyse trends and ask management on variations
Procedure / AS / iv.Report if cash received from directors against shares, if actually not received u/s
other points) 143(1)
 Inventory
1. Existence - Conduct physical verification to confirm physical inventory matches with records
- Check variation of physical & actual sheet and ask stockiest to sign
- Ensure inventory lying with 3rd party and confirm it using SA 501
- Check inventory ageing report

2. Records /
Stock / cash / bank register
Register
3. Valuation Check
- 3rd party stock / damaged / absolute stock excluded
- Stock held by 3rd party (stockiest)  included
- Valuation as per FIFO / Weighted average
- Cost of carriage inward, etc  included
- Ensure WIP / FG properly calculated

4. Rights / - Sale purchase bill

Obligations - Shipping documents, PO, GRN, declaration letter for stock help by 3 rd party (stockiest)
 Inventory
5. Presentation & - Schedule III (part I)
Disclosure - Properly classified into
(can also mention (a) RM (b) WIP (c) FG (d) Stock in Trade (e) stores & spares
where it is recorded (f) loose tools, others
in Balance Sheet) - Goods in transit – separately disclosed

6. Other Important i. Cut-off Procedure: followed

Points ii. AS: AS-2 inventory valued at lower of cost or NRV
(Law / Cut-off iii.ARP : COGS to inventory ratio, vertical analysis for reasonableness
Procedure / AS / iv.CARO reporting
other points) v. Follow SA 501
 Note
1. Tangible asset
2. Intangible asset
3. Trade payables
4. Contingent liability
5. Current assets
6. Shares at premium
7. Sweat equity shares

Study with same pattern
 Sales
1. Check ICS Regarding execution of transaction & recording of sale

2. Ensure Date Pertains to current year or not

3. Authorisation Check whether transaction is properly authorised by Sales Manager

4. Recording • Check whether transaction is properly recorded

• Check whether sales return is properly adjusted
• Check all discounts & incentives have been properly deducted
• Ensure no fictitious sale is recorded
5. Supportive Ensure occurrence & correctness of transaction from supportive documents such as sales invoice,
Documents credit note, shipping documents, GST returns.

6. Books / Confirm transaction is complete & properly posted by tracing it in Sales Register, Stock Register,
Registers Cash Book, Bank Book, Debtor Register, Security Gate Outward Register.

7. Presentation & Check whether revenue from operation is properly disclosed as

Disclosure i. Sale of products ii. Sales of service iii. Other operating revenue
i. Cut off procedure
8. Other ii. AS – Ensure AS 18 is complied if sales made to related party
Important Points iii. ARP – compare sales return : Sales ratio of previous year to ensure genuineness &
reasonableness of transaction
 Purchase
1. Check ICS Ordering, procurement & recording of purchase

2. Ensure Date Pertains to current year or not

3. Authorisation Check whether transaction is properly authorised by Purchase Manager

4. Recording • Check whether transaction is properly entered

• Proper bifurcation of revenue & capital purchase
• Ensure no fictitious purchase is recorded
5. Supportive Ensure occurrence & correctness of transaction from supportive documents such as GRN,
Documents Purchase invoice (Original) (in name of entity), GST invoice

6. Books / Confirm transaction is complete & properly posted by tracing it in Purchase Register, Stock
Registers Register, Cash Book, Bank Book, Creditor Register, Security Gate Inward Register.

7. Presentation & Sch III

Disclosure Stock in trade properly disclosed

8. Other i. AS – Ensure AS 18 is complied if related party transaction

Important Points ii. Cut off procedure
iii. ARP – Creditor turnover ratio, stock turnover ratio
 Interest / Dividend Income
1. Check ICS Recognizing, receiving & accounting

2. Ensure Date Pertains to current year or not

3. Authorisation Check whether transaction is properly authorised by Recovery Manager, Accounts Manager, CFO

4. Recording • Check whether transaction is properly recorded

• Check whether interest on FD – recognized on time proportion basis
• Dividend – recorded only when right to receive established
5. Supportive Ensure occurrence & correctness of transaction from supportive documents such as TDS
Documents certificate (26 AS), Investment Certificate, bank statement

6. Books / Registers Confirm transaction is complete & properly posted by tracing it in Investment register, bank book.

7. Presentation & Schedule III (Part 1)

Check whether ‘other income’ is classified as – Interest income, dividend income, other non-
Disclosure operating income

8. Other i. Cut off procedure

ii. AS – Ensure AS 19 (revenue recognition) is complied
Important Points iii. ARP – interest /dividend : Investment Ratio
iv. SA 505  External Confirmation from banks & investment company officials
 Employee Benefit Expense (salary, bonus, gratuity, etc.)
1. Check ICS Ascertainment, calculation, payment & accounting

2. Ensure Date Pertains to current year or not

3. Authorisation Check whether transaction is properly authorised by HR Manager

4. Recording • Check whether transaction is properly entered

• Check whether the expense recorded actually occurred during the year
• Check calculations
5. Supportive
TDS certificate, Salary slips, attendance record, HR policy manual, calculation sheet,etc.
Documents
6. Books / Confirm transaction is complete & properly posted by tracing it in payroll register, cash book,
Registers bank book.

8. Other i. AS – Ensure AS 15 is complied

Important Points ii. Law – provisions of Bonus Act, Gratuity Act, EPF Act, Minimum Wages Act, ESIC Act, etc
Complied
iii. ARP – compare expense incurred during year with previous years