Introduction to Assurance

Question 1

What are the five elements of an assurance engagement?

Answer 1

Three party involvement
Appropriate subject matter
Suitable criteria
Sufficient appropriate evidence
Written assurance report

Question 2

What does a three party involvement consist of?

Answer 2

Practitioner
Intended users
Responsible party

Question 3

What are the two types of assurance engagement?

Answer 3

Reasonable assurance engagements
Limited assurance engagements

Question 4

What type of assurance engagement gives a negatively worded assurance conclusion?

Answer 4

Limited assurance engagements

Question 5

What type of assurance engagement states that ‘in our opinion, the financial statements give a true and fair view’?

Answer 5

Reasonable assurance engagements

Question 6

What type of engagement is an external audit?

Answer 6

Reasonable assurance engagements

Question 7

What are the benefits of an audit?

Answer 7

Higher quality information
Independent scrutiny
Reduces the risk of management bias and fraud
Enhances the credibility of the financial statements
Deficiencies in the internal control system may be highlighted

Question 8

What is the expectation gap?

Answer 8

A belief that auditors will find all fraud and mistakes, or that they themselves prepare the financial statements

Question 9

What are the limitations of an audit?

Answer 9

Financial statements include subjective estimates
Internal controls may be relied upon
Representations from management may be relied on
Evidence is persuasive not conclusive
Do not test all transactions

Question 10

What type of engagement is a review engagement?

Answer 10

Limited assurance engagements