In accounting and auditing, occurrence and existence assertions are crucial for ensuring the accuracy of financial statements. While they may seem similar, they have distinct meanings.
Occurrence Assertion: This refers to the assertion that the transactions recorded in the financial statements actually took place during the accounting period. In other words, it verifies that the events that have been recorded correspond to real occurrences. For example, if a company records a sale, the occurrence assertion ensures that the sale indeed happened.
Existence Assertion: On the other hand, the existence assertion is concerned with the assets, liabilities, and equity that are reported in the financial statements. It confirms that those items actually exist at the date of the financial statements. For instance, if a company claims to have a certain amount of cash on hand, the existence assertion confirms that this cash is physically there.
How They Differ from Completeness: Completeness is another fundamental assertion that ensures all transactions and accounts that should be included in the financial statements are actually included. While occurrence focuses on the validity of transactions that have been recorded and existence checks on the reality of the reported items, completeness guarantees that nothing has been omitted. In simple terms, occurrence and existence are about validation while completeness is about inclusion.
In summary, occurrence relates to whether transactions happened, existence checks if reported items are real, and completeness ensures all relevant information is captured. Understanding these differences is essential for accurate financial reporting and effective auditing.