Fundamentals of Assurance Services

Question 1

Limited Assurance Engagement

Answer 1

Reduction in assurance engagement risk to a level that is acceptable where the risk is greater. serves as a basis for a negative form of expression of conclison.

Question 2

Assurance Engagement Definition

Answer 2

Engagement in which a practitioner expresses a conclusion that enhances the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria

Question 3

COMPARISON: Assurance Engagement

Answer 3

• Output: Assurance in form of an opinion
• Designed to improve quality or enhance credibility of the subject matter
• Three-party contract
• Independence is required
• Examples: Audit, Review, Examination of Prospective Financial Information

Question 4

How does related service framework differ from the assurance framework

Answer 4

Related services engagements do not result in an opinion

Question 5

Considerations when planning and performing the engagement evidence gathering procedures

Answer 5

1. Quantity and Quality of evidence- must ask two questions if its good enough (appropriate) and is it enough (sufficiency)
2. Materiality- Relevant in determining the nature, timing , and extent of procedures
3. Assurance Risk- Risk of expressing the wrong opinion or conclusion when it is materially misstated
4. Cost-Benefit- Benefits derived from evidence gathering procedures will outweigh the costs of obtaining it.
5. Professional Skepticism- Must always have a questioning mind

Question 6

Document that defines the elements and objectives of an assurance engagement, but does not by itself, establish the standards or provide procedural requirement for the performance of assurance engagements

Answer 6

Philippine Framework for Assurance Engagements

Question 7

Elements of Assurance Engagements

Answer 7

1. Three-Party Relationship
2. Appropriate Subject Matter
3. Sufficient & Appropriate Evidence
4. Suitable Criteria
5. Conclusion ( Written Report)

Question 8

Professional judgment is the application of relevant training, knowledge and experience, within
the context provided by _____________ in making informed decisions about the courses of
action that are appropriate in the circumstances of the audit engagement

Answer 8

Auditin, Accounting and ethical standards

Question 9

Subject Matter

Answer 9

it is the nature of the assertion the practitioner gathers sufficient evidence. examples include:
- Historical or prospective financial position, financial performance, and cash flows
- Performance of an entity
- Capacity of a Facility
- Entity’s internal control or IT system
- Corporate governance, compliance with regulation, and human resource practices

Question 10

What type of assurance does review provide

Answer 10

Moderate or limited level of assurance

Question 11

Generalization of reliability of evidence

Answer 11

1. External Source > Internal Sources
2. Effective Controls > Ineffective Controls
3. Directly Obtained > Indirectly Obtained
4. Documentary Form > Oral Form
5. Original Document > Photocopy or Facsimiles

Question 12

Types of Opinions

Answer 12

1. Unqualified: Presented fairly in all material respects
2. Qualified: Presented fairly except for
3. Adverse: Do not present fairly in all material respects
4. Disclaimer of Opinion: Do not express an opinion or conclusion

Question 13

Reasonable Assurance Engagement

Answer 13

Reduction in assurance engagement risk to an acceptably low level as the basis for a positive form of expression of the conclusion

Question 14

Characteristics of Suitable Criteria

Answer 14

Completeness- Sufficiently complete when relevant factors that could affect conclusions in context of
engagement circumstances are not omitted

Relevance- Contribute to conclusions that assist decision making by the intended users

Reliability- allows for consistent evaluations or measurement of the subject matter when used in similar circumstances by similar qualified practitioners

Understandability- Contribute to conclusions that are clear comprehensive and not subject to different interpretations

Neutrality- contribute to conclusions that are free from bias

Question 15

Subject Matter Information

Answer 15

Pertains to the outcome of the evaluation or measurement of the subject matter. It is for which the practitioner gathers evidence to provide a reasonable basis for expressing a conclusion in the assurance report. Examples include:
- Recognition, measurement, presentation and disclosure, represented in the financial statements
- Key indicators of efficiency and effectiveness
- Specifications documents
- Assertion about effectiveness
- Statement of compliance or a statement of effectiveness

Question 16

Suitable Criteria

Answer 16

The benchmarks used to evaluate the subject matter including where relevant presentation and disclosure

Question 17

The single feature that most clearly distinguishes auditing attestation and assurance is

Answer 17

Scope of Services

Question 18

COMPARISON: Non-Assurance Engagement

Answer 18

• Output: Recommendation on how to use the information
• Give suggestions, comments, or recommendations on how to use information
• Two-party contract
• Independence is not required
• Examples: Agreed-upon Procedures, Compilation, Filing of Tax Returns, Management Services

Question 19

Three Parties in an Assurance Engagement

Answer 19

1. Practitioner- Responsible for determining the nature, timing, and extent of procedures required by the engagement.
2. Responsible Party- in charge of preparing the subject matter, subject matter information, or both
3. Intended User- person/s for whom the assurance report is prepared