When an auditor examines financial statements under the PCAOB audit standards, there is no guesswork involved. Every number and disclosure, as well as classification, has an underlying claim—made by management—that must be tested. These are called PCAOB assertions.
Recognizing these assertions is not just an academic exercise. It directly links into the core audit procedures leveraged to assess the fairness of the financial statements. In a PCAOB audit, the emphasis on internal controls adds another dimension compared to a GAAS audit. This heightened focus is one of the primary reasons how a PCAOB audit is different from a normal audit.
Each assertion falls under a broader category and affects how auditors design their testing procedures. The core assertions are outlined below:
Auditors should confirm that the assets recorded on the balance sheet actually exist and the transactions in the income statement actually took place.
This one checks that nothing is left out. If the business incurred a liability or completed a transaction during the period, it should be in the books.
Figures must not only exist—they must be correct. This covers evaluating fair value and depreciation alongside allowance estimates.
It is not enough that an asset is on the balance sheet. The company should also own it. Likewise, any listed liability should reflect a real obligation.
This assertion tests whether items are classified properly and the disclosures are in line with applicable financial reporting standards.
The framework behind these assertions is not unique to PCAOB. However, under PCAOB audit standards, the spotlight shines brighter on how internal controls support each assertion—especially in the context of ICFR (Internal Control over Financial Reporting).
In comparing PCAOB vs GAAS, the difference is not about having different assertions. It is about how much confidence auditors should gather to rely on the company’s systems. For PCAOB audits, control testing is not optional. The findings here are not only about what’s wrong—but also about how the company would even know if something went wrong in the first place.
This speaks to a broader point: audit requirements for public companies are designed to handle greater scrutiny from the investing public and market analysts as well as regulatory authorities.
It is natural to confuse PCAOB assertions with accounting standards. In order to clarify: PCAOB standards govern the audit process. U.S. GAAP governs how financials are prepared. So when an individual brings up PCAOB vs US GAAP, the conversation should shift to roles. The PCAOB auditor’s job is not to re-calculate revenue—it is to assess whether the revenue reported under GAAP is accurate, properly supported, and complete. For further assistance, Dimov Audit presents professional services for PCAOB audit.