Chapter 12 Flashcards
what is an assurance engagement
when a pro accountant evaluates a subject matter that is the responsibility of another party against suitable criteria and expresses an opinion to the intended user
what does a practitioner of an assurance engagement need to meet the requirements of
Code of ethics and ISQC 1 - need to have a proper engagement
what is the 3 party relationship of an assurance engagement
practitioner
responsible party
intended user
5 elements needed for an assurance engagement
three party relationship appropriate subject matter suitable criteria sufficient appropriate evidence written assurance report with reasonable or limited assurance
examples of subject matter
physical characteristics
performance of an entity
reliability of systems and processes
what is the objective of a reasonable assurance engagement
positive form of expression from practitioner
example
in our opinion process is reliable based on XYZ criteria
what is the objective of a limited assurance engagement
negative form of expression
nothing has come to our attention to show process is not reliable
what is an attestation engagement
client measures subject matter against criteria - practitioner provides assurance of whether or not its free from material misstatement
what is a direct reporting engagement
practitioner measures subject matter against criteria then also assurance conclusion, may mean they do additional procedures
who are limited assurance audits popular with
companies who dont need an audit
difference in report for engagements to review historical FS
addressed to directors not SH’s
report for an engagement to perform agreed-upon procedures
practitioner performs agreed upon procedures and does a report - no assurance just own conclusions
what is a typical due diligence review
where a practitioner is engaged by one company planning to take over another to identify material risks with the transaction so they know they have all the fats
common things included in a due diligence review
financial due diligence - review of financial position and identify anything like covenants
environment due diligence - env/ social issues
regulatory DD - are they compliant with regs
people DD - key staff positions under new structure
operational and IT dd - extent of ops and IT risks
examples of due diligence enquiry and analytical procedures
assets and liabs - to value company
business plan - is it realistic
managements representations of companies and evidence
credibility of owners
financial health
