Copyright 2006 McGraw-Hill Australia Pty Ltd Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett Slides prepared by Roger Simnett Force of
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14-Copyright 2006 McGraw-Hill Australia Pty Ltd
Revised PPTs t/a Auditing and Assurance Services
in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
Chapter 14 Other Assurance Services
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Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
The Current Framework for Assurance
Services Learning Objective 1:
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Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
Force of Law Auditing Standards
(1 July 2006)
The force of law auditing standards apply to all audits and reviews of Corporations Act 2001 financial reports that commence on or after 1 July 2006, (these would be
under the left branch of figure 1.2):
• for such audits, the Australian Auditing Standards is
now be designated as ASA’s, and will have to same
numbering as the equivalent ISA’s
• for such reviews, the Australian Auditing Standard AUS
902, is now designated as Australian Standard on
Review Engagements ASRE2410, equivalent to the
International Standard on Review Engagements ISRE 2410.
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Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
A review of levels of assurance
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Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
Limited Assurance (Review) Engagements
• Used when limited (moderate) rather than reasonable (high) level of assurance deemed appropriate.
• Report provides negative assurance of whether
anything has come to auditor’s attention that causes auditor to believe that the subject matter is not fairly presented.
Learning Objective 2:
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Slides prepared by Roger Simnett
Reviews of financial reports
• Limited assurance engagements for financial reports are called reviews.
• In planning for a review engagement, knowledge of entity is vital.
• Major evidence collection procedures are:
– inquiries of management; and
– analytical procedures.
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Slides prepared by Roger Simnett
Reporting considerations
• Important that client and user understand that a review
is being undertaken, not an audit:
• Engagement letter and discussion with client must
ensure that differences between review and audit are understood.
• Review report must clearly show that lower level of
assurance than that obtained from an audit is provided.
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Slides prepared by Roger Simnett
Example of an unqualified review report
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Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
Example of an unqualified review report
(Cont.)
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Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
Example of an unqualified review report
(Cont.)
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Slides prepared by Roger Simnett
Agreed-Upon Procedures
• Such procedures are broad-ranging and can be in any area where the client and user perceive them to be
beneficial For example:
– Accounts payable listing is complete and accurate.
– Academy Awards votes are confidentially maintained and properly counted
Learning Objective 3:
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Revised PPTs t/a Auditing and Assurance Services in Australia 3e by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett
Importance of understanding what is
agreed upon
• Engagement letter should clearly set out:
– Nature of engagement, and the fact that procedures
performed are not an audit or review;
– List of procedures to be performed as agreed;
– Anticipated form of report; and
– Restrictions on distribution of report.
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Slides prepared by Roger Simnett
Assurance services on financial information
other than general purpose reports
• Special purpose reports;
• Components of financial reports;
• Summarised financial reports; and
• Due diligence engagements.
Learning Objective 4:
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Assurance Services Required by Specific
Legislation or Regulations
• Future-oriented (prospective) financial information;
• Internal controls, e.g superannuation reporting
obligations; and
• Statistical or highlight-style information, e.g reporting by authorised deposit-taking institutions (e.g banks and building societies) for national regulator (Australian
Prudential Regulation Authority - APRA).
Learning Objective 5:
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Assurance services other than financial report
assurance currently being provided
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Prospective financial information
• Forecasts – prepared on basis of assumptions of future events expected to take place, and reflect expected
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Reporting on prospective financial
information
• Two levels of assurance contained in report:
– Positive assurance is provided as to prospective financial information being prepared in accordance with
assumptions (e.g calculations), fairness of presentation – Moderate assurance is provided on best estimate
assumptions (No opinion is expressed on hypothetical assumptions.)
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• Demonstrated by recent changes in the USA as a result
of the introduction of the Sarbanes-Oxley Act (SOX).
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Reports on internal control (IC)
• Establishing suitable criteria for testing controls is a key aspect If entity clearly sets out what constitutes a
satisfactory IC system, then easier for auditor to
undertake audit There is however no suitably detailed description of IC that would serve as an audit criteria for all entities.
• Auditor should assess both design and operating
effectiveness of IC systems.
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Reporting on statistical or highlight
information
• Potential growth area for assurance services;
• This information is commonly provided, either as part of
or separate from a financial report;
• Currently auditor provides no assurance on such
information but must review for misstatements of fact or material inconsistencies (Refer Ch 13);
• Auditor could provide separate assurance on these key performance indicators.
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Assurance Services Being Promoted by
the Assurance Profession
• Many possibilities, but the following are currently
provided or proposed, and most expected to have high growth prospects:
– Risk assessment (p 671);
– Business performance measurement (pp 672);
– Assurance for e-commerce — business to consumer: