Business, Legal & Accounting Glossary

Definition: Existence

Full Definition of Existence

Existence is 1 of 5 audit assertions presented by Statement of Auditing Standards No. 31 (SAS 31).

SAS 31 states, “Assertions about existence or occurrence deal with whether assets or liabilities of the entity exist at a given date and whether recorded transactions have occurred during a given period.”

Unlike audit procedures for other assertions such as Completeness, the Existence & Occurrence assertion requires the auditor to go beyond what has already been recorded on the journal and general ledger. Outside of blind faith, there is now way to determine whether assets or liabilities exist without some manner of outside confirmation.[2]

Here are examples of several testing procedures that usually correspond to certain balance sheet accounts:

  • Confirmations/Confirm – Please refer to the “confirmation” entry for a description the different types of confirms.
  • Inventory observation

An example of a matter for which existence can be reasonably assured only through an outside party is a legal confirmation (see confirmation). During the auditor’s initial interviews with the client’s management, the management may very well fail to disclose a contingent liability. If that possible liability is a strict liability settlement that later materializes into an amount that consequentially misstates the final draft of the [[financial statement, it is the auditor’s responsibility for not having contacted the client’s retained legal parties.

Inventory observations are an auditor’s staple for confirming the existence of inventory. It involves the auditor travelling to the storage and/or manufacturing facilities of a client’s operation to determine the physical existence of the inventory as of that date. For this reason, inventory counts are generally completed on or very near the reporting date. As with a legal or other type of confirmation, it is the only way an auditor can base reliance on the true nature of things. Management may omit or include such matters and transactions from its books at will.

Cite Term

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Page URL
Modern Language Association (MLA):
Existence. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 23, 2021 https://payrollheaven.com/define/existence/.
Chicago Manual of Style (CMS):
Existence. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/existence/ (accessed: September 23, 2021).
American Psychological Association (APA):
Existence. PayrollHeaven.com. Retrieved September 23, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/existence/

Definition Sources

Definitions for Existence are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd April, 2020 | 17 Views.