Completeness is the financial statement assertion that all transactions, events, assets, liabilities, equity interests and disclosures that should have been recorded or disclosed have been. An assertion is a representation management makes about the financial statements, and this one asks what is missing rather than whether what was recorded is right. It is the understatement side of an audit, the mirror of occurrence and existence, which is why it is tested by tracing forward from source documents into the ledger rather than by vouching backward from it.
Where the Completeness Assertion Is Written Down
Generally accepted auditing standards, GAAS, govern audits of non-issuers, meaning entities outside the public company regime, and they state it twice: all transactions and events that should have been recorded have been recorded, and all assets, liabilities and equity interests that should have been recorded have been recorded. Each branch reaches the same way into disclosures, that all related disclosures which should have been included in the financial statements have been included, so no separate presentation and disclosure category holds a third version of the assertion (AU-C 315, .A219).
Issuers, audited under Public Company Accounting Oversight Board standards, use a flatter list, where completeness means all transactions and accounts that should be presented in the financial statements are so included (PCAOB, AS 1105, Audit Evidence, .11).
Why Completeness Is the Understatement Side
The relevance of audit evidence depends on the design of the procedure that produced it, in particular whether that procedure was designed to test for understatement or overstatement (PCAOB, AS 1105, .07), and those two sides are not the same size. The maximum amount by which an account balance or total of transactions can be overstated is generally the recorded amount, whereas understatements could be larger (AU-C 265, Communicating Internal Control Related Matters Identified in an Audit, .A8). An understated account and a completeness failure are the same problem seen from two sides, and that asymmetry is why the understatement side is the harder one to bound.
Unrecorded Liabilities
One of the standard’s own illustrations of a completeness risk is a liability one. Where the auditor identifies loan covenants the entity is at risk of failing as a fraud risk factor, the auditor may determine there is a greater susceptibility to misstatement from fraudulent financial reporting, such as overstatement of assets and revenue and understatement of liabilities and expenses to ensure the covenants are met, and the assertion level risks the auditor may then identify include completeness of certain liabilities (AU-C 315, .A227).
In a firm’s own files that becomes a search for unrecorded liabilities: reading the payments made after the period end and the receiving reports carrying no invoice against them, then deciding which belong in the period just closed. A close asks the same question first, which is why a month end close starts by confirming every source of transactions has been drawn down.
Completeness, Accuracy and Cutoff
All three are assertions in the same list, and they answer different questions. Accuracy asks whether the amounts and other data attached to a recorded transaction are right, cutoff asks whether it was recorded in the correct accounting period, and completeness asks whether it was recorded at all.
A supplier invoice posted at the wrong figure is an accuracy question, the same invoice posted in January when the goods arrived in December is a cutoff question, and the invoice still sitting unopened is a completeness question.
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms on accounting and tax work rather than audit fieldwork, and a firm can run a block of its own closing work through a trial task and check what came back against what did not.
