Fundamentals of Audit and Assurance Services
Fundamentals of Audit and Assurance Services
Fundamentals of Audit and Assurance Services
Assurance, defined
The practitioner’s
satisfaction as to the
reliability of an assertion
being made by one party
for use by another party.
Intended Users The person, persons or class of persons for whom the
practitioner prepares the assurance report.
2. Subject matter
Financial performance or conditions Historical or prospective financial position, Recognition, measurement, presentation
financial performance, cash flows and disclosure represented in financial
statements
Non financial performance or conditions Performance of an entity Key indicators of efficiency and
effectiveness
Systems and processes An entity’s internal control or IT system An assertion about effectiveness
Subject matter and subject matter information An entity engages a practitioner to perform assurance
engagement regarding a report it prepared about its own
sustainability practices.
3. Suitable criteria
May be:
Established criteria
Are those embodied in laws or
regulations, or issued by authorized or
recognized bodies or experts that follow a
transparent due process.
A. Professional Skepticism
B. Sufficiency and Appropriateness of
Evidence
C. Cost-Benefit Considerations
D. Materiality
E. Assurance Engagement Risk
F. Quantity and Quality of available
evidence
A. Professional skepticism
▪ Sufficiency ▪ Appropriateness
▫ Quantity ▫ Quality
▫ The greater the ▫ The better the
RISK, the higher quality, the
the QUANTITY of lesser evidence
evidence is needed
▫ Relevance +
Reliability
Sufficiency and Appropriateness
▪ RELIABILITY:
▫ External vs internal documents
▫ If internal, controls should be
effective
▫ Direct vs indirect / by inference
▫ Documentary vs oral/verbal
▫ Original vs photocopy/facsimile
C. Cost-benefit considerations
▪ Must be in the
form appropriate
to a reasonable
assurance
engagement or a
limited assurance
engagement.
Types of assurance engagements
▪ POSITIVE ▪ NEGATIVE
▪ According to ▪ According to
level of structure
assurance ▫ Assertion based
▫ Reasonable engagement
assurance (Attestation)
▫ Limited assurance ▫ Direct reporting
engagement
According to structure
Assurance
Three party contracts in which Audit
o
an assurer reports on (or Auditing is a systematic
improves) the quality of process of objectively
information obtaining and evaluating
Attestation evidence regarding
Type of assurance service assertions about economic
actions and events to
in which an attestor (an
independent accountant) ascertain the degree of
offers assurance about a correspondence between
subject matter (e.g. those assertions and
compliance with debt established criteria and
covenants) that is the communicating the results
responsibility of another to interested users.
party.
ASSURANCE VIS-À-VIS
ATTESTATION SERVICES
ASSURANCE ENGAGEMENTS
ASSERTION BASED
DIRECT REPORTING
ENGAGEMENTS
AUDIT
Related Services
ASSURANCE
(Non-assurance
services)
Audit
•Examination of prospective FS
•CPA performance review •Review of FS
•CPA Risk Advisory •Review of interim information
Other Assurance Services
▪ Business
▫ Provides
Performance Measurement
assurance about whether financial and non financial information being reported
from the entity’s performance measurement system (e.g. balanced scorecard) is reliable and
whether the performance measures being used are accurately leading the entity toward
meeting its strategic goals and objectives.
▪ Health
▫ Involves
Care Performance Measurement
the evaluation of the quality of health care, medical services and outcome.
▪ Elder
▫ An Care Plus
evaluation designed to provide assurance to the elderly and their relatives about the
quality of care being provided by various care givers by comparing their specific
objectives in providing care with actual services rendered.
▪ ▫ Risk Assessment Services
Identifies a set of risks that affect the organization and involves the study of the link
between risks and the organization’s vision, mission, objectives, and strategies and
development of new and relevant measures to address these risks.
▪ ▫ CPA Web Trust
WebTrust is a seal of assurance service developed jointly by AICPA and CICA which enables
consumers and businesses to purchase goods and services over the Internet with the
confidence that the Web site business meet high standards of business practice.
▪ Information
▫ Involves Systems Reliability
evaluating whether financial and non financial information systems provide
reliable information for operating and financial decisions by an entity’s management.
Aspect of Auditing Review Related Services
comparison
Nature of service Audit Review Agreed upon Compilation
procedures
Level of High, but not absolute Moderate None None
assurance
provided
Procedures Select from all available Inquiry and analytical Procedures agreed Reduce detailed data
procedures any procedures designed to upon to a manageable and
combination that can review reliability of an understandable form
limit audit risk to an assertion
appropriately low level.
Features Auditor’s opinion Audit skills and Recipients of the Accounting, not
enhances credibility of techniques applied, but report must form their auditing, expertise
FS accounting and internal own conclusions; used
control systems not report may be 37
assessed restricted
Note: When to accept assurance
engagements
Relevant ethical requirements, such
as independence & competence, is
satisfied.
Engagement circumstances exhibits
ALL of the following:
Subject matter is appropriate.
Criteria to be used are suitable and are
available to the intended users.
Practitioner has access to sufficient
appropriate evidence to support his
conclusion.
Practitioner’s conclusion is to be
contained in a written report.
Practitioner is satisfied that there is a
rational purpose for the engagement.
1.2 INTRODUCTION TO
AUDITING
Independent Auditor
ESTABLISHED
ASSERTIONS
CRITERIA
Prepares FS
Unaudited FS Evaluates FS
Audit Report
Audited FS
on FS
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