What do existence and occurrence assertions verify?

The assertion regarding existence and occurrence primarily pertains to the validity of transactions and balances recorded in the financial statements. In the context of financial reporting, these assertions ensure that:

1. Existence: This aspect verifies that assets, liabilities, and equity reported actually exist at the date of the financial statements. For instance, if a company claims to have a certain amount of cash or inventory, auditors will check that these assets are physically present and can be confirmed through supporting evidence.

2. Occurrence: This aspect is about ensuring that transactions recorded in the financial statements have actually taken place during the accounting period. It addresses the validity of transactions; for example, if sales are reported by the company, auditors will look for evidence such as sales invoices or contracts to confirm these transactions occurred.

Thus, the correct response accurately encapsulates the essence of these assertions by emphasizing that they confirm both the existence of recorded transactions and their occurrence within the relevant financial period. This verification process is crucial in establishing the reliability of financial statements, providing assurance to users that the financial data presented is both truthful and realistic.

The other options relate to aspects of financial reporting but do not capture the primary essence of the existence and occurrence assertions. They address broader concepts such as the settlement