Assurance: An assurance engagement is an engagement in which an
assurance practitioner aims to obtain sufficient appropriate evidence in order
to express a conclusion designed to enhance the degree of confidence of the
intended users other than the responsible party about the outcome of the
measurement or evaluation of an underlying subject matter against criteria.
5 Key Elements of an Assurance Engagement
A three party relationship
Responsible party – party issuing the statement/report
Intended user – external parties intending to use the report
Assurance provider - the objective auditor/reviewer
An appropriate subject matter – the material being commented on
Suitable criteria – against which the material is evaluated
，
the relevant
reporting standards
Most common GAAP
Usually: IFRS
Sufficient appropriate evidence – information gained by the assurance
provider using a systematic process.
Should be obtained by the assurance
practitioner to prove that the subject matter information is free of material
misstatement.
Written assurance report with opinion / conclusion statement
Audit: Engagement to provide an independent opinion on financial information
to shareholders/members. Is an assurance engagement – highest level of
assurance. Express independent opinion on the true and fairness of the
financial statements to enhance the confidence of the stakeholders.
Objective of audit: Objective is for an auditor to express an opinion on
whether the subject material complies with the relevant criteria and in doing
so adds credibility to the subject material.
Limitations of Audits Engagements
Is an opinion not a guarantee – provides reasonable assurance not absolute
assurance of the compliance with reporting requirements
Is not designed to detect all fraud. Audit relies on information provided by
responsible party (preparer of the financial statements). Involves the use of
judgement/ Relies on sampling
Therefore, is not a guarantee and statements may still contain material error
and misstatements
Auditor’s Rule: to obtain reasonable assurance about whether the financial
report is true and fair.
Audit
Reasonable assurance (“In our opinion …) Unrestricted scope of work – fairly
intensive
Acceptably low level of audit risk Provides High but not absolute assurance –
Opinion
Review
Limited/ moderate assurance (“Nothing has come to our attention/ we have
not become aware …)
Still unrestricted scope of work BUT less intensive
Greater level of engagement risk than for Audit.
Lower level of assurance
than an Audit – Conclusion
No assurance
Scope of work – restricted to terms agreed w client
No opinion or no third party
Agreed Upon Procedures Engagement
Work to be done is agreed between the parties
Accountant is not free to decide what work to complete
Results are reported (may be to a third party)
No judgement is provided – facts are reported i.e the results of the procedures
completed
Provides no assurance
recipients make their own conclusion on basis of information received.
