Fundamentals of Assurance Services

Question 1

Assurance vs Non Assurance
- # of parties
- requirement of independence

Answer 1

Assurance
- 3-party
- required

Non Assurance
- 2-party
- not required

Question 2

ASATAU

Answer 2

Assurance > Attestation > Audit

Question 3

Attestation vs Direct Reporting
- wordings
- responsible for SM, SMI, Report

Answer 3

ATTESTATION ENGAGEMENT
- “In our opinion the responsible party’s assertion that internal control is effective, in all material respects, based on XYZ criteria, is fairly stated”
- SM → Responsible Party
- SMI → Responsible Party
- Report → Practitioner

DIRECT REPORTING ENGAGEMENT
- “In our opinion internal control is effective, in all material respects, based on XYZ criteria”
- SM → Responsible Party
- SMI → Practitioner (more responsibility)
- Report → Practitioner

Question 4

ELEMENTS OF ASSURANCE ENGAGEMENTS (3 RECS)

Answer 4

3-party Relationship
Report
Evidence
Criteria
Subject Matter

Question 5

3-Party Relationship (RIP)

What to remember for R? for P?

Answer 5

Responsible party: Management
- may be one of the intended users, but not the only 1

Intended users: Users of financial statements

Practitioner: Independent auditor
- Broader than the term “auditor”

Question 6

Appropriate Subject Matter
Audit Assertions (TAP)
- TOCCAC
- ACREV
- POCAC

Answer 6

Classes of Transactions
- Occurrence
- Completeness
- Cut off
- Accuracy
- Classification

Account Balance
- Completeness
- Rights and Obligations
- Existence
- Valuation

Presentation and Disclosure
- Occurrence
- Completeness
- Accuracy
- Classification

Question 7

Suitable Criteria (RUNCR)

Answer 7

benchmarks used to evaluate evidence
- Reliability
- Understandability
- Neutrality
- Completeness
- Relevance

Question 8

Sufficient Appropriate Evidence
- component of appropriateness
- relationship of materiality with evidence
- more evidence can compensate for poor quality. True or False?

Answer 8

• Appropriateness (relevance and reliability)
• Inverse
• False

Question 9

Assurance Engagement Risk

Answer 9

IR x CR x DR

Question 10

Inherent Limitations of Audit

Answer 10

• sampling
• persuasive (not conclusive) evidence
• inherent limitation of IC

Question 11

Composition of Assurance Engagement Standards

Answer 11

• PSA
• PSRE
• PSAE

Question 12

Audit vs Review vs Agreed-upon vs Compilation
- requirements

Answer 12

Audit and Review
- independence + COBID

Agreed-upon and Compilation
- COBID

Question 13

Audit vs Review vs Agreed-upon vs Compilation
- level of assurance

Answer 13

Audit
- high, not absolute

Review
- moderate

Agreed-upon and Compilation
- none

Question 14

Audit vs Review vs Agreed-upon vs Compilation
- report

Answer 14

Audit
- positive form

Review
- negative form

Agreed-upon
- report on factual findings

Compilation
- compilation report

Question 15

Audit vs Review vs Agreed-upon vs Compilation
- availability

Answer 15

all users
- XPN : Agree-upon → limited