Lecture Auditing and assurance services (Second international edition) Chapter 20 Assurance, related services and internal auditing

In this chapter, the learning objectives are Know the definition of assurance services, be familiar with the types of assurance services offered by cpas, know the definition of an attestation engagement, know the types of attestation engagements.

Assurance,

Related Services and

Internal Auditing

Chapter Twenty

Elliott Committee: Assurance Services

Assurance services are independent professional services

that improve the quality of information,

or its context, for decision-makers.

Decision-Making and the Role of

Information

Assurance Services and IAASB Engagement

Standards

IAASB: Assurance Engagements

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

IAASB: Assurance Engagements

• Subject matter and

IAASB: Assurance Engagements

• Ethical requirements

• Appropriate subject matter.

• Suitable criteria.

• Sufficient appropriate evidence.

• Practitioner’s conclusion in a written report.

• Reasonable or limited assurance

• Conclusion in positive or negative

form.

• Rational purpose.

Assurance engagement risk is the risk that the practitioner expresses an inappropriate

conclusion when the subject matter

information is materially misstated

IAASB Assurance Standards and

Assurance Level

• Reasonable assurance means that the

engagement assurance risk is reduced to an acceptably low level in the circumstances of the engagement

• In a limited assurance engagement the risk is greater than for a reasonable assurance

engagement, but still acceptable in the

circumstances of the engagement

The nature, timing and extent of procedures for

gathering sufficient appropriate evidence in a

limited assurance engagement are deliberately

limited relative to a reasonable assurance

engagement

IAASB Assurance Standards and

Assurance Level

Review of Historical Financial Information

• Review as an alternative to an audit.

• Review performed by the auditor of the entity, for

example review of interim financial information.

• Historical financial information.

• Inquiries and analytical procedures.

• Limited assurance

• Negative form of expression of the conclusion.

Negative form of expression of the conclusion The review provides a basis to express a conclusion whether anything has come to the practitioner’s attention that

causes the practitioner to believe that the financial information is not in accordance with the applicable financial

reporting framework

Review Report – Unmodified Conclusion

Review Report – Qualified Conclusion

Assurance Engagements Other Than Audits and Reviews of Historical Financial Information

• Ethical requirements.

• Quality control.

• Engagement acceptance and continuance.

• Agreeing on the terms of the engagement.

• Planning and performing the engagement.

• Using the work of an expert.

• Obtaining evidence.

• Considering subsequent events.

• Documentation.

• Preparing the assurance report

• Other reporting responsibilities.

ISAE 3000 Establish procedural requirements for assurance engagements not covered by ISAs or ISREs.

Assurance Report Compliance with the Kimberley Process

Assurance Report Compliance with the Kimberley Process

Assurance Report Compliance with the Kimberley Process

Assurance Report on Internal Control

IAASB Assurance Projects

Overview of Global Reporting Initiative (GRI)

G3 Guidelines

Assurance on Sustainability Reporting

What type of information does sustainability reporting

Why is third-party assurance of sustainability reporting demanded?

What is relevant guidance

for assurance on sustainability reporting?

What is the role of practitioners as assurers of sustainability reporting?

Assurance on Prospective Financial

Information

Financial forecasts

are prospective financial information

based on

expectations of

future events and

actions

Financial projections are

prospective financial information based on

hypothetical assumptions

about future events and

actions.

Assurance on Prospective Financial

Information

(1) Evaluating the

preparation.

(3) Evaluating the presentation.

(2) Evaluating the

support of the underlying assumptions

(4) Issuing an assurance report

Related Services

Related Services

Agreed-Upon Procedures Report

Agreed-Upon Procedures Report (cont.)

Compilation Report

Internal Auditing

Internal auditing is an independent, objective

assurance and consulting activity designed to add value and improve an organization’s operations.

It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk

management, control, and governance processes.

Institute of Internal Auditors (IIA)

Standards

Mandatory guidance

IIA Code of Ethics

Principles

Integrity

Objectivity Confidentiality

Competency

Internal Auditors’ Roles

Evaluating Risks and

Controls

Reviewing Compliance

Internal Audit Function

Interactions between Internal and External

Auditors

Some of the

work performed by

internal auditors may

be directly relevant to the work of the external auditor.

Before a decision

to use some of the work of internal auditors, the external auditor must evaluate the internal auditors’ objectivity and competence.

End of Chapter 20