Assurance: An assurance engagement is an engagement in which anassurance practitioner aims to obtain sufficient appropriate evidence in orderto express a conclusion designed to enhance the degree of confidence of theintended users other than the responsible party about the outcome of themeasurement or evaluation of an underlying subject matter against criteria.5 Key Elements of an Assurance EngagementA three party relationship Responsible party – party issuing the statement/reportIntended user – external parties intending to use the reportAssurance provider - the objective auditor/reviewerAn appropriate subject matter – the material being commented onSuitable criteria – against which the material is evaluated，the relevantreporting standardsMost common GAAP Usually: IFRSSufficient appropriate evidence – information gained by the assuranceprovider using a systematic process. Should be obtained by the assurancepractitioner to prove that the subject matter information is free of materialmisstatement.Written assurance report with opinion / conclusion statementAudit: Engagement to provide an independent opinion on financial informationto shareholders/members. Is an assurance engagement – highest level ofassurance. Express independent opinion on the true and fairness of thefinancial statements to enhance the confidence of the stakeholders.Objective of audit: Objective is for an auditor to express an opinion onwhether the subject material complies with the relevant criteria and in doingso adds credibility to the subject material.Limitations of Audits EngagementsIs an opinion not a guarantee – provides reasonable assurance not absoluteassurance of the compliance with reporting requirementsIs not designed to detect all fraud. Audit relies on information provided byresponsible party (preparer of the financial statements). Involves the use ofjudgement/ Relies on sampling Therefore, is not a guarantee and statements may still contain material errorand misstatementsAuditor’s Rule: to obtain reasonable assurance about whether the financialreport is true and fair.Audit Reasonable assurance (“In our opinion …) Unrestricted scope of work – fairlyintensive Acceptably low level of audit risk Provides High but not absolute assurance –OpinionReview Limited/ moderate assurance (“Nothing has come to our attention/ we havenot become aware …) Still unrestricted scope of work BUT less intensive Greater level of engagement risk than for Audit. Lower level of assurancethan an Audit – ConclusionNo assurance Scope of work – restricted to terms agreed w client No opinion or no third partyAgreed Upon Procedures EngagementWork to be done is agreed between the partiesAccountant is not free to decide what work to completeResults are reported (may be to a third party) No judgement is provided – facts are reported i.e the results of the procedurescompletedProvides no assurance
recipients make their own conclusion on basis of information received.