Chapter 6 Planning assurance engagements

Question 1

1.1 Planning assurance engagements

Answer 1

All assurance engagements involve the same overall process: acceptance, planning, evidence, and reporting. Audits are governed by international standards on auditing. For an audit engagement different ISAs apply at different stages of the process.

Question 2

2.1 Responsibilities of management and assurance providers

Answer 2

Management is responsible for preparing the prospective financial information. The assurance provider is responsible for reaching a conclusion on whether the assumptions are reasonable, and the prospective financial information is prepared on the basis of these assumptions. Relevant procedures includes:
- Consider management’s competence regarding the preparation of the forecasts
- Assess the reasonableness of assumptions made
- Check the forecasts have actually been prepared on the basis of these assumptions
- Check mathematical accuracy
- Seek written management representations regarding the use of financial information, completeness of management assumptions and management’s acceptance of its responsibility for the prospective financial information
- If any of the period of the forecast has already elapsed, compare to historic information

Question 3

3.1 Review engagements

Answer 3

A review engagement involves an assurance practitioner reviewing historic financial information. ISRE 2400 applies to review engagements where an assurance practitioner other than the statutory auditor reviews financial information.

Question 4

3.2 Responsibilities of management and assurance providers

Answer 4

Management is responsible for the preparation of the financial information in accordance with the relevant reporting framework. The assurance provider is responsible for reaching a conclusion on whether anything has come to their attention to suggest the information does not give a true and fair view and consider if the accounts are free from material misstatement. Procedures are likely to be limited to:
- Enquiries of management and others within the entity
- Analytical procedures
- Seeking written management representations
The principles of ISRE 2400 are applied to the review of interim financial information by the statutory auditor of an entity in ISRE 2410.

Question 5

4.1 Greenhouse gas statements

Answer 5

From April 2013 companies listed on main market of London stock exchange are required to make disclosure of greenhouse gas emissions. Other companies choose to make the disclosures. ISAE 2410 sets out the requirements. The level of assurance could be:
- Reasonable: an opinion on whether the GHG statement has been prepared in accordance with the acceptable criteria
- Limited: conclusion on whether anything has come to the practitioner’s attention to indicate that the GHG statement has not been prepared in accordance with the acceptable criteria
The engagement is likely to be complex and subject to uncertainty due to difficulties in estimation and measurement.