- The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?
- In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
- Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain - Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
Imran Jordan Kharabsheh says
1. The concept of “assertions” is not only important to Accountants, but it is also important to Auditors. This is because the dimension descriptions associated with management assertion correlate with the objectives by which auditors assess information. These dimension descriptions are: Occurrence of transactions, Existence of Assets, Transaction Timing, Complete Information, Accuracy of transactions, Appropriate Evaluation of Assets, Appropriate Right Ownership, and Consistent Summarization.
2. In my experience as an Internal Auditor, I found that completeness is arguably the most important dimension to consider from the list of management assertion dimension descriptions. One of the reasons that I had almost borne witness to first hand was the potential damage that missing or incomplete information can cause financially. After I had retrieved documentation and tested the asset management personnel at the investment bank I used to intern at, my boss looked through the documentation I had retrieved and went slightly pale when he found that there were some assets who’s tracking had stopped and not continued for a long period of time. My boss immediately called a meeting with the head of the department and the employees who were responsible for recording the information, lecturing them and forcing them to re-prepare the documentation with the missing information as soon as possible.
3. At some point around 6 months ago, I had become careless and had become the victim of fraud and credit information theft. After carefully monitoring my bank account for 2 months, I had discovered that there were recurring and irregular purchases titled App Store in various amounts. After getting over the initial horror that I had critical information stolen, I decided to contact the bank and have begin an investigation alongside cancelling all my cards. Thankfully, I was refunded the entire amount that had been stolen from me, and was able to quickly receive replacement cards in the mail some short time later.
4. I believe the most vulnerable step of the procure to pay process would be Payment Processing, as this process is often handled by a separate team or organization aside from the producers and consumers themselves. For example, if you were to purchase a product off of IKEA and they allowed you to purchase through PayPal, then there is now a third party. If there happens to be a vulnerability either on the PayPal side of the transaction or the consumer’s computer is already infected with spyware, then there is a looming risk of the consumer’s PayPal and other information being compromised.
Anonymous says
Hi, Imran,
I like your responses to each question. Especially when we have the similar answer for question one and four, and it is interesting to see a different reason for the similar answer. For example, your reason for your answer to question four reminds me that Paypal is a kind of 3rd party in the payment process, and we need to be aware of it, However, we have a different opinion on question 2. I think accuracy is the most important dimension. After I read your opinion, I find out each dimension is important. Also, thanks for sharing your experience on question 3.
Penghui Ai says
Sorry about not login with my account. Just in case, this response is from Penghui.
Rouying Tang says
1. The concept of ‘Assertions’ is important to accountants. Who else is it important to? Why?‘
The concept of “assertions” is also important for auditors. When auditors conduct audit of a company’s financial statement, they want to assure the assertions of transaction-level account balance and presentation and disclosure regarding to corresponding income statement, balance sheet, and income statement.
Rouying Tang says
2. In class we discussed several dimensions of Management Assertions. Which do you believe is the most important? Why?
In my opinion, the completeness is the most important dimensions of management assertions, which require auditor make sure all transactions, asset, liability and equity should be recorded are recorded. And all information should be disclosed is disclosed. Without completeness, the existence, accuracy, understandabilities ect. are all meaningless.
Rouying Tang says
3. Have you ever:
– Been victim of Fraud?
– Had evidence of, suspicions of fraud occurring?
– Been pressured (e.g. by an employer) to commit an act that was morally or legally questionable?
Explain
Yes, I have been victim of fraud. last year, I had two surgery. As an international student, I am required to purchase insurance. Fortunately, I brought one. However, despite my policy states the pre-existing conditions are covered after half year waiting period, they denied my claims for pre-existing conditions.
I double checked my claims and the information in their website. I am sure they must pay for my claims. I requested the appear and prepared to request legislation helps from lawyers. Eventually, they admitted the mistake and made the payments.
Rouying Tang says
4. Which portion / step of the Procure to Pay process do they see as the most vulnerable to theft, fraud or failure of some kind? Explain
I believe the payment process, especially when a credit card is related would be the most vulnerable to theft, fraud or failure. When I first time come to US, I was surprise that the credit card are not required pin or any other controls. You can finish payment by simply swiping the card, which is unbelievable. For the online shopping, you don’t even need to confirm the card, the information literately shown in the card are enough to complete the transactions. In China, any transaction conduct are required pins, and the online banking transaction online are required an extra physical USBkey to process. Even though there are still more than 50,000 frauds happened in China 2016, and only 1.65 billion Yuan can be getting back from more than 10 billion of losses.
Deepa Kuppuswamy says
1. In my understanding of financial statement assertion, I believe that “Assertion” is equally important to Management (Accountants), Auditors and Investors.
Most of us would think that financial statement assertions are auditors responsibilities but it is critical and essential to understand that gathering and assembling the financial statements is management’s responsibility too because as auditors we rely and assess on the claims (statement of fact) made by the management such as balance sheet and income statement are truthful presentation of its assets and liabilities.
These assertions are important to shareholders too because the financial statement assertions are viewed as organization’s official statement and this is used to evaluate company’s profit and loss and to create financial metric. Below listed are the five financial statement assertions:
– Existence or occurrence.
– Completeness.
– Rights and obligations.
– Valuation or Allocation.
– Presentation and disclosure.
2. I believe that all the 5 financial statement assertions listed above are equally important and essential in our audits because each of the line in financial statement is assessed and evaluated based each of the five dimensions. Let us take an example of Temple University’s income statement; fees payment made by student will be recorded in income statement. Let us relate this with each of the dimensions:
Completeness assertion is violated: – Fees was paid by the student indicates that the transaction occurred but failing to record this would result in incomplete data so there is a violation in completeness.
Existence (or occurrence) is violated: – A transaction in income statement is recorded with the Student ID-‘A’ but that student never existed in the university this results in the violation of existence or occurrence.
Rights and Obligations: – Let us say Fox School has placed 100 new printers in the building, this should be recognized in the inventory and the university has the right to ownership and the use of the recognized asset and liabilities.
Valuation: – During assessment of financial statement, we should make sure that assets, liabilities and equity balances have been valued correctly.
Presentation and Disclosure: – As part of this step, we need to make sure that financial statements are reported in accordance with GAAP and leading industry standards.
3. Fortunately, I have never been a victim of any fraud so far. Being from IT background, I fairly have some knowledge about the scams, cyber-crime and frauds so I try to always keep an eye on my PII by periodically changing my passwords, purging my old files from laptop, clear phone cache on regular basis, disabling auto fill features and password remember functions in phones and laptops or in any other system. I completely understand that these frauds and scams are solely depends on the availability of information to fraudsters or through any unforeseen instances like theft and lack of knowledge about the information securities.
4. Both procurement process and payment process are highly vulnerable to fraud. These risks can never be fully eliminated; to reduce the likelihood of these occurring organizations should implement strong internal controls.
Requirement Planning Request for Quotation Creation of Purchase Order Good Receipt Preparation of goods receipt Creation of Payment Invoice Payment Reporting
Segregation of Duties (SoD) should be set in place in order to reduce the risk around fraudulent activities. Below listed are the most important SOD conflicting roles which should not be given to same individuals:
Vendor Maintenance =! Post Invoice [Risk: Create fictitious vendor and post fictitious invoice for payment]
Purchase Order Entry & Maintenance =! Goods Receipt [Risk: Release for payment without having received goods]
Goods Receipt =! Post Invoice [Risk: Release for payment without having received goods]
Vendor Maintenance =! AP Payment Processing [Risk: Processing User might create fictitious mandate details paying away money]
Rouying Tang says
Hello Kuppyswamy, thank you for your sharing about your experience. The idea of 5 financial statement assertions listed are equally important is interesting, although I disagree with you. And I like your explanations regarding to the vulnerable part of business process.
Peiran Liu says
1. The concept of ‘Assertions’ is also important to auditors. The reason why it is also important to auditors is that auditors use assertions to perform tests on a company’s policies, guidelines, internal controls and financial report processes, which is the most important part of job that auditors are taking part in.
2. In my opinion, the most important dimension of management assertions is existence. Dimensions like completeness, if you just lack something, you are able to make it up. But if there is something that doesn’t exist, everything you have done can be hidden to somewhere that doesn’t exist, which can cover all other dimensions of management assertions, making it the most important dimension.
3. I think that I was a victim of some kind of fraud. It was my first time purchasing a Apple Computer. The model I bought was a MacBook Air. The website of Apple never mentioned what model of processor that the computer had. Only i5 or i7 is mentioned. As I was lack of this area of knowledge, I purchased the i7 model which was supposed to be blazing fast. It turned out that it wasn’t. Later on I realized that there are so many processors and for laptop platform, the most important factor isn’t that it is i5, i7 or even i9. The number of cores it has is the most important factor. Apple only advertised it is i5 or i7, not mentioning the number of cores. As the i7 model is much more expensive than the i5 model, Apple can made lots of money out of this.
4. I think that the payment processing is much more vulnerable to theft, fraud or failure of some kind. For online shopping in US, the most important part of information of a card is the CVV number, as your card number can be seen everywhere. But if you make a purchase in store, as your waiter might take away your card, CVV number can also be seen, which is a opportunity to theft, fraud or failure of some kind.
Penghui Ai says
1. The concept of “Assertions” is also important to auditors. Assertions assist auditors in considering a wide range of issues that are relevant to the authenticity of financial statements. The consideration of management assertions during the stages of audit helps to reduce the audit risk.
2. In my opinion, the most important dimension of management assertions is accuracy. Most of the business scandals like Enron and WorldCom are fraud on accuracy. Accuracy is hard to achieve because any small mistakes on calculation will affect the results. In addition, inaccurate information has a negative impact on the organization’s reputation, so the company will lose profits from providing inaccurate information to the public.
3. I have been a victim of fraud in a few years ago when I bought a fake limited edition of Air Jordan XI. The salesman sold his product at a lower price on Taobao.com, and the comments and pictures of his products look persuasive, and he convinced me by chatting with me. It looks like a real edition when I receive the shoes, but the shoes broke after one week. Therefore, I realized that I became a victim of a fraud. After this event, I found that we can only trust a person with strong evidence.
4. I think Payment is the most vulnerable to theft portion of the Procure to Pay process because it always contains to more valuable information like the bank account. Theft will always target on finding a loophole in the step of payment, so they can get cash directly. In addition, the step of pay always has more vulnerability because it has at least two entities involved, such as payer and bank. Therefore, any mistakes in any entity will create a loophole for theft.
Yuan Liu says
1. In my opinion, assertion is not only important for accountants, it is also essential for auditor. Assertion is what management claims, which means Assertion should show the guideline of occurrence, existence, timing and completeness. Auditors have to record transaction, find the evidence the assets, liabilities and equity balances. At the meantime, auditor should record transactions in proper accounting period with correct dates. All these step should based on the management willing.
2. I think the most important part of management assertion dimension descriptions is existence, which include evidence the assets, liabilities and equity balances exist and exist at a given date. all these show the current situation of the company and give people a general idea about the company, which the basement of the company current situation out coming.
3.My debt card was lost and there was credit on it. I did not realized that happening in the situation. However, the second day, I receipt a warning message from my bank and asked me if there was my shopping activity. There are amount of online shopping tracking on my debt card transaction history. I just pause all transaction in that period and let bank know I just lost my card, all the transaction in that period was not me. After that, my bank account was frozen for two days and all the transactions during that period were recovered. One week later, bank sent me a new card and every invalid transaction gone. I have been pressured to commit an act that was morally questionable. I worked in a restaurant as a waiter for several months. The employer always ask me trying to save money by selling overnight rice to customers, which is bad for health.
4. I think vendor selection would be the most vulnerable to fraud and good receipt would be the most vulnerable to theft based on my experience. To select vendor, company has to search, evaluate and make a judgement to choose vendor. there are three part in the process of selection, there are some threat that would happen. For example, vendor can provide some benefit for sponsor of purchasing company personally, which means sponsor can give the vendor more change to get the deal. The fraud process can be used in the evaluation part. If there are two vendors, which have similar product, the decision would be more subject based on the selection sponsor willing.