10 - Assurance and Other Enagements

Question 1

Agreed upon procedures?

Answer 1

Specified in engagement letter
Does not make any judgements
No opinion or conclusions
Restricted to those who have agreed since others may misinterpret

Question 2

Compliance engagements?

Answer 2

Accounting expertise
No opinion provided
Preparation of financial statements commonly included
Collection/classification/summary of financial info

Question 3

What is an assurance engagement?

Answer 3

Practitioner aims to obtain sufficient appropriate evidence to express a conclusion designed to enhance the degree of confidence of the intended users

Question 4

Objectives of an assurance engagement?

Answer 4

Enhance the credibility of the underlying subject matter

Doesn’t have to be financial

Public interest element

Question 5

Elements of an assurance engagement?

Answer 5

Criteria (suitable)
Underlying subject matter
Three party relationship
Evidence (sufficient)
Report (assurance report)

Question 6

Three party relationship?

Answer 6

Practitioner
Responsible party
Intended used

Question 7

Suitable criteria?

Answer 7

Relevant, complete, reliable, neural and understandable

Question 8

Sufficient and appropriate audit evidence

Answer 8

Professional scepticism 
Free form material misstatement
Materiality 
Engagement risk 
Quality 
Quantity

Question 9

Types of assurance engagements?

Answer 9

Reasonable assurance

Limited assurance

Question 10

Reasonable assurance?

Answer 10

Engagement risk acceptably low
Positive opinion
Reasonably certain free from material misstatement

Question 11

Limited assurance?

Answer 11

Level of risk higher than reasonable assurance engagement

Opinion expressed in negative form - no evidence that the financial statements are materially misstated

Question 12

Processes of an assurance engagement?

Answer 12

Acceptance and continuance
Planning (inc risk assessment)
Systems and controls analysis 
Collection of evidence (Substantive testing)
Completion (inc reporting)

Question 13

Acceptance and continuance considerations?

Answer 13

Commercial - financial and reputational risks

Professional - non compliance

Consider for whom and what purpose report is prepared

Question 14

4 outcomes when assessing third party liability

Answer 14

Accept duty of care and include third party in engagement letter
Ensure third party confirms there is no duty of care
Include a disclaimer of liability to any third party
Reject engagement

Question 15

Can only accept engagement if it exhibits?

Answer 15

Ethical requirements
Competence and capable to carry out
Basis agreed - common understandings and preconditions

• roles and responsibilities
• underlying subject matter
• suitable criteria
• available to intended users
• evidence
• written report
• rational purpose

Question 16

What does an engagement letter do?

Answer 16

Clarifies responsibilities
Scope
Form of report
Work that will be performed

Contract of work

Question 17

Minimum content of an assurance engagement report?

Answer 17

Title
Addressee
Identify and describe level of assurance obtained 
Criteria
If needed describe limitation 
Identify responsible party and responsibilities 
Statement performed in accordance with ISAEs
Adhered to standards 
Summary of work
Conclusion
Signature 
Date 
Location of practice

Question 18

Factors considered for other engagements?

Answer 18

Parties
Subject matter
Criteria
Procedures
Type of report

Question 19

Half yearly report

Answer 19

May choose to have reviewed
Timeliness
Estimated to a greater extent

LIMITED ASSURANCE ENGAGEMENT
Lower level
Less work
Less costly

Evidence through enquiry and analytical procedures
Engagement letter

No audit opinion in written report

Question 20

Prospective financial information

Answer 20

Assumptions about events in future

Forecasts - prospective financial info on basis of assumptions on events management expect to happen
Projections - hypothetical assumptions

Subjective
Moderate level of assurance through negative opinion

Question 21

When examining prospective finance info the auditor should consider?

Answer 21

Reasonableness of assumptions
Correct application
Disclosure 
Consistency of accounting principles 
Obtaining Written representations

Question 22

Prospective financial info report should include?

Answer 22

Statement anything has come to attention that not reasonable
Opinion on whether properly prepared
Actual results likely to be different
Statement on set of assumptions and not necessarily expected to occur - in case of projection

Question 23

Forensic auditing?

Answer 23

Application of auditing skills to situations that have legal consequences

E.g investigation of fraud

Reactive or proactive

Question 24

XBRL tagging?

Answer 24

Inline XBRL format must be used to deliver company tax returns electronically to HMRC

In f/a have computer readable tags

Taxonomy - library of codes
Review accuracy of this tagging e.g agreed upon procedures engagement

Question 25

Due diligence engagements

Answer 25

Most commonly performed when one company planning to take over another

Advise on risks
No specific guidance

• legal
• tax
• operations
• financial info

Question 26

Accounting services associated with listings?

Answer 26

LSE Listing Rules require a prospectus
- info investors and advisers need and expect to allow to make informed assessment

Need - unqualified FS, interim info if last accounts more than 6m a go, optional profit forecast info

Question 27

Public interest engagements?

Answer 27

Best value audits - Scotland public bodies, statutory duty in local government and formal duty in rest of public sector

Corporate and performance assessment

Outcomes 
Effectiveness of partnership 
Service performance and use of resource 
Risk based approach 
Clear and transparent audit
Improvement and good practice