Financial statement assertions, also referred to as management assertions, are the explicit or implicit assertions made by a company regarding the fundamental accuracy of information contained in its financial statements. Financial statement assertions can be viewed as a company's official statement that the figures in its financial statements, such as the balance sheet and income statement, are a truthful presentation of its assets and liabilities in accordance with the applicable standards for recognition and measurement of such figures.

The financial statement assertions are important to investors, since nearly every financial metric used to evaluate a company's stock is computed using figures from the company's financial statements. If the figures are inaccurate, that would obviously result in misleading financial metrics, such as the price-to-book ratio (P/B) or earnings per share (EPS), which both analysts and investors commonly use to evaluate stocks.

When a company's financial statements are audited, the principal element an auditor reviews is the reliability of the financial statement assertions. In the United States, the Financial Accounting Standards Board (FASB) establishes the accounting standards that companies must follow in the preparation of financial statements. As of 2016, the FASB requires publicly traded companies to prepare financial statements in accordance with the Generally Accepted Accounting Principles (GAAP).

The different financial statement assertions attested to by a company's preparer of such statements include assertions of existence, completeness, rights and obligations, accuracy and valuation, and presentation and disclosure.

Existence

The assertion of existence is the assertion that the assets, liabilities and shareholders' equity balances appearing on a company's financial statements actually exist as stated at the end of the accounting period that the financial statement covers. For example, any statement of inventory included in the financial statement carries the implicit assertion that such inventory exists, as stated, at the end of the accounting period. The assertion of existence applies to all assets or liabilities included in a financial statement.

Completeness

The assertion of completeness is an assertion that the financial statements made are thorough and include every item that should be included in the statement for a given accounting period. For example, the completeness of transactions included in a financial statement means that all transactions included in the statement occurred during the accounting period that the statement covers, and that all transactions that occurred during the stated accounting period are included in the statement. The assertion of completeness also states that a company's entire inventory, even inventory that may be temporarily in the possession of a third party, is included in the total inventory figure appearing on a financial statement.

Rights and Obligations

The assertion of rights and obligations is a basic assertion that all assets and liabilities included in a financial statement belong to the company issuing the statement. The rights and obligations assertion states that the company owns and has the ownership rights or usage rights to all recognized assets. In regard to liabilities, it is an assertion that all liabilities listed on a financial statement are liabilities of the company and not of any third party.

Accuracy and Valuation

The assertion of accuracy and valuation is the statement that all figures presented in a financial statement are accurate and based on proper valuation of assets, liabilities and equity balances. For example, the assertion of accurate valuation regarding inventory states that inventory is valued in accordance with the International Accounting Standards Board's IAS 2 guidelines, which requires inventory to be valued at the lower figure of either cost or net realizable value. The financial assertion of accuracy and valuation states that the different components of a financial statement, such as assets, liabilities, revenues and expenses, have all been properly classified within the statement.

Presentation and Disclosure

The final financial statement assertion is that of presentation and disclosure. This is the assertion that all appropriate information and disclosures regarding the company's financial statement are included in the statement, and that all the information presented in the statement is presented in a fair and clear manner that facilitates ease of understanding the information contained in the statement.

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