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1-20. Auditing services is a subset of assurance services which require a report to third parties. Specifically, auditing services address assertions of management. More specifically, we tend to think of auditing services as audits of a company’s financial statements in which management asserts that the financial statements accurately portray the company’s financial results. However, as indicated in the chapter, auditing services are not necessarily confined to financial statements.Assurance services don't necessarily evaluate assertions, but are aimed at improving the quality of information for decision making without an assertion by management about the existing quality.1-21.The four primary attributes needed to perform assurance services is:•Subject matter knowledge: The assurance provider must have expertise in the area on which assurance is provided. Knowledge of the area allows them to make accurate judgments.
1-8 Solutions for Chapter 1 – Auditing: Integral to the Economy•An independencefrom the parties requesting the assurance as well as the parties benefiting from the assurance: The provider must be unbiased, objective, and independent of the company or process being evaluated. Independence instills confidence in the assurances provided. •Established criteria or standardsregarding assurance subject: Having an agreed upon set of standards against which to compare the subject matter allows assurance providers to uniformly make judgments.•Expertise in the process of providing assurance: Assurance services are enhanced when providers have a systematic process with which to gather and evaluate the information or process.These same attributes are also required for audits of a company’s financial statements.1-22. The three levels of assurance that can be provided are:•Positive Assurance. An assurance service requiring the systematic gathering and evaluating of sufficient evidence to unequivocally support an opinion on the assurance provided. The opinion can state that the financial statements either are, or are not, fairly presented in accordance with GAAP. The nature of positive assurance is that the auditor has sufficient justification to issue a report –whether it be a good report or a bad report.Example: An auditor’s positive assurance (an audit report which states whether or not the financial statements are presented fairly) is required in SEC filed financial statements.•Negative Assurance. An assurance service that is designed to provide a moderate amount of assurance on the subject matter, for example a statement on whether or not the audit noticed any problems in conjunction with a review of interim financial statements. The auditor has gathered some information, but not enough to provide a positive statement of whether the statements are right or wrong.