Chapter 1 Flashcards
T or F
assurance engagements require independence on the part of the auditor
T
T or F
Assurance refers to the responsible party’s satisfaction as to the reliability of an assertion being made by one party for use by another party
F(Assurance refers to the practitioner’s satisfaction)
The degree of satisfaction achieved(the level of assurance which may be provided) is directly related to the scope of procedures performed by their results.
T or F
T
Assurance services are ________ contracts.
3 party
Users of financial statements
investors
creditors
government
customers
employees
why investors, creditors, government, customers and employees needs financial statements?
*To know whether to buy, hold, or sell shares of a company
*To approve loans applies for by a debtor or borrower
* to amend or retain the taxation rules and regulations currently in force
* whether to continue doing business with the company, or to find another supplier
* whether to demand a salary increase; whether to stay with the company, or to go looking for another job
Elements of assurance engagement:
- A 3 party relationship involving a practitioner (CPA), a responsible party and intended users
- An appropriate subject matter
- Suitable criteria
- Sufficient appropriate evidence
- A written assurance report in the form appropriate to a reasonable assurance engagement or a limited assurance engagement.
3SECC para masaulo
- All of this elements must be present in an engagement for the engagement to be classified as an assurance engagement
3 separate parties involve in assurance engagement
practitioner (auditor)
responsible party
intended users
who’s responsible for the subject matter or the subject matter information in an assurance engagement
May or may not be the party who engages the practitioner (the engaging party)
Provides the practitioner with a written representation that evaluates or measures the subject matter against the identified criteria, whether or not it is to be made available as an assertion to the intended users
responsible party
Who are the person, persons or class of persons whom the practitioner prepares the assurance report?
Intended users
Assurance engagements performed by CPAs are intended to enhance the ______ about a subject matter by evaluating whether the subject matter conforms in all material respects with suitable criteria.
credibility of information
Criteria are the benchmarks used to evaluate or measure the subject matter including, where relevant, benchmarks for presentation and disclosure.
Required for reasonably consistent evaluation or measurement of a subject matter within the context of professional judgment.
The evaluation or measurement of a subject matter merely on the basis of the practitioner’s own expectations, judgments and individual experience would not constitute suitable criteria.
Suitable Criteria
Criteria are the _______ used to evaluate or measure the subject matter including, where relevant, benchmarks for presentation and disclosure.
benchmarks
Applicable criteria for: Audit on internal control
Established internal control framework or individual control objectives specifically designed for the engagement COS
Applicable criteria for: compliance audits
applicable law, regulation or contract
Characteristics of suitable criteria
Relevance
Completeness
Reliability
Neutrality
Understandability
_________ are those embodied in laws or regulations, or issued by authorized or recognized bodies of experts that follow a transparent due process.
Established criteria
__________ are those designed for the purpose of the engagement.
Specifically developed criteria