Concept of Assurance Flashcards
What are the five elements of an assurance engagement?
- Three-party relationship (practitioner, responsible party, intended users)
- Subject matter (e.g., financial data, systems, processes)
- Suitable criteria (e.g., accounting standards, regulations)
- Sufficient appropriate evidence
- Written assurance report
Define the concept of an assurance engagement.
An assurance engagement is an assignment where a practitioner expresses a conclusion to enhance the confidence of intended users about the outcome of an evaluation or measurement of subject matter against criteria.
What information might stakeholders find important but is not covered in statutory audits?
- Corporate governance issues, including risk assessment and internal control systems.
- E-commerce operations and systems reliability.
- Performance measurement (financial and non-financial).
- Value for Money (VFM) assessments.
What distinction does the International Framework for Assurance Engagements make between audits and other assurance engagements?
- Audits and reviews of historical financial information: Regulated by ISAs and ISREs.
- Assurance engagements other than audits or reviews: Regulated by ISAEs.
Which bodies regulate assurance engagements, and which specifically regulate statutory audits?
- Assurance engagements are regulated by the IAASB under IFAC.
- Statutory audits are regulated by ISAs and governed by national laws, such as the Companies Act.
Why can absolute assurance not be provided in assurance engagements?
- Inherent limitations in evidence gathering.
- Limitations in subject matter precision.
- Constraints of time and cost.
Provide two examples each of assurance and non-assurance engagements.
Assurance engagements: Statutory audit, review of prospective financial information (PFI).
Non-assurance engagements: Tax planning and advice, forensic investigations.
What is the primary objective of an audit in the context of assurance?
To provide a high level of assurance that financial statements are free from material misstatements and are prepared in accordance with established criteria.
What are the roles of the International Audit and Assurance Standards Board (IAASB)?
The IAASB issues international standards on audit (ISAs), assurance engagements (ISAEs), and related services to guide the conduct of audits and other assurance services.
What are two types of assurance engagements?
- Assertion-based engagements: The practitioner reports on the reliability of assertions made by another party (e.g., financial statements).
- Direct reporting engagements: The practitioner reports on issues they evaluate directly.
What are the characteristics of a subject matter suitable for assurance services?
- Identifiable and measurable.
- Capable of being subjected to procedures and evidence gathering.
What information does the International Framework for Assurance Engagements provide about regulation?
- It distinguishes between audits/reviews of historical financial information (regulated by ISAs and ISREs) and other assurance engagements (regulated by ISAEs).
- It emphasizes that statutory audits are regulated by ISAs in conjunction with national laws.
