introduction to assurance, auditing and related services Flashcards
refers to the practitioner’s satisfaction as to reliability of an assertion being made by one party for user by another party.
assertion
an engagement in which a practitioner expresses a conclusion designed to enhance 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.
assurance engagement
assurance services are performed by _____________ designed to improve the quality ore enhance the credibility of the subject matter of the engagement.
independent professional/ external auditor
objective of assurance engagement
a practitioner to evaluate or measure a subject matter that is the responsible of another party against identified suitable criteria and express a conclusion that provides the intended user w/ a level of assurance about the subject matter.
elements of assurance engagement
3SECC
1. 3 party relationship
2. appropriate subject matter
3. suitable criteria
4. a written assurance report (conclusion)
3 party relationship consists of:
a. practitioner
b. responsible party (management)
c. intended users (stakeholders)
difference between professional accountant, practitioner, and auditor.
professional accountant - CPA engaged in any area of accountancy
practitioner - CPA rendering professional services (assurance or non-assurance)
auditor - practitioner rendering audit and review services
nature of an assertion the practitioner gathers sufficient evidence.
subject matter
an outcome of the evaluation or measurement of the subject matter.
subject matter information
it is for w/c the practitioner gathers sufficient appropriate evidence to provide reasonable basis for expressing a conclusion in an assurance report.
subject matter information
characteristics of subject matter to be considered appropriate:
- identifiable, and capable of consistent evaluation or measurement against the identified criteria.
- can be subjected to procedures for gathering sufficient appropriate evidence to support a reasonable or limited assurance.
benchmarks used to evaluate or measure the subject matter.
criteria
criteria may be:
- formal - PFRS, COSO, applicable laws, regulation or contracts.
- less formal - internally developed code of conduct
- established - issued by law/ government
- specially developed - designed for the purpose of the engagement.
characteristics of suitable criteria
RUN CR
a. Reliability
b. understandability
c. neutrality
d. completeness
e. relevance
Communication of criteria to intended users
- publicly
- through inclusion in the presentation of the subject matter information.
- through inclusion in the assurance report
- by general understanding
consideration when planning and performing the engagement
a. quantity of evidence
b. quality of evidence
c. materiality
d. assurance engagement risk
e. cost-benefit consideration
f. professional skepticism
measure of the quantity of evidence.
sufficiency
the measure of the quality of evidence that is relevance and reliability
appropriateness
the risk that the practitioner expresses an inappropriate to conclusion when the subject matter information is materially misstated.
assurance engagement risk
the susceptibility of the subject matter information to a material misstatement, assuming that there are no related controls
inherent risk
the risk that a material misstatement that could occur will not be prevented or detected and corrected, on a timely basis by related internal control
control risk
the risk that the practitioner will not detect a material misstatement that exists.
detection risk
in performing evidence-gathering procedures, the practitioner is expected to observe ______________.
cost-benefit consideration.
in case there is a significant evidence-gathering procedure that must be performed but involves high cost, the practitioner may:
- identify and perform alternative procedures that minimize the cost.
- in the absence of alternative procedures, the practitioner is still required to perform the procedures as long as he believes that performance of it is necessary and beneficial to the entire engagement.
