What are the elements of an assurance engagement?
Syllabus A1e)Explain the five elements of an assurance engagement. Show
Every assurance project needs 3 users, some subject matter, judged against some criteria by gathering evidence, to then be reported on5 Elements of Assurance engagements are:
Assurance engagement is normally involved three parties and consists of five important elements. Those five elements include criteria, report, evidence, subject matter, and three-party relationship. Here is the detail: What are the criteria for the engagement? For example, if the engagement is the audit of financial statements, then the criteria would be the standards or principle that management use to prepare the financial statements. Let’s say, IFRS is the standard that management uses to prepare financial statements. In this case, the auditor will perform their audit by using the international standard on auditing to review if the financial statements being audited are prepared based on IFRS or
not. 2) Report:The result of the work performed by the practitioner should be reported to the predetermine users of the reports. For example, in the audit engagement, auditors are issued to report by expressing their opinion based on the result of their work. The opinion that they express should be based predetermined set of objectives. Their work should also perform independently from management who is responsible for preparing the subject matter. For example, the auditor should be independent of management or entity. That means the conflict of interest should be minimized to the level that could not impair the quality of the audit opinion. 3) Evidence:Strong support from entity management is required to help auditors perform their work and obtain the evidence. Advertisements Evident is very important to the quality of the report. The practitioner has to obtain sufficient and appropriate evidence to support its opinion in the reports. The auditor should follow the auditing standards if the evidence could not obtain or if there is intervention from management that let them could not obtain the evidence. 4) Subject matter:Assurance engagement should have a clear subject matter. For example, if the entity engaging the audit firm to perform their assurance services like an audit of financial statements, or review of financial statements as well as due diligence, then the engagement should have a very clear subject matter. Like, that is the engagement objective, in which period the services will cover (scope from 01 January 2017 to 31 December 2017). Advertisements Three parties relationship:Normally, in the engagement, there are three parties involved. The first one is the intended users, as the users of audit reports. These groups of people are the management of the entity, shareholders, the board of directors, and the government body. The second is the responsible party for the subject matter that is being examined by the practitioner. For example, an entity that is an engaging practitioner as well as management of the entity. Management is responsible for preparing financial statements. The third party in the engagement is the practitioner. This practitioner is normally the professional audit firm that audits the financial statements or provides others limited assurance services. According to International Framework on Assurance Engagements, there are five elements of any assurance engagement which are as follows: These are FIVE ingredients of any and every assurance engagement and in
the absence of any of the above five elements it can be an engagement but NOT an assurance engagement. Students must remember that assurance engagement does not only mean audit engagement. Audit engagement is one type of assurance engagement. Other types include, review engagements and other assurance engagements which are not audit and review engagements. What are the types of assurance engagement?Under this Framework, there are two types of assurance engagement a practitioner is permitted to perform: a reasonable assurance engagement and a limited assurance engagement.
What are the three parties involved in an assurance engagement?Assurance engagements involve three separate parties: a practitioner, a responsible party and intended users.
What is the main purpose of assurance engagement?The objective of an assurance engagement is to obtain sufficient appropriate evidence to express a conclusion, providing reasonable or limited assurance, as to whether the audited body has complied with the specified requirements of the appropriate legislation (the 'criteria') in all material respects.
What are the main stages of assurance process?The assurance process is divided into four key phases.. 3.2.1 Preparing.. 3.2.2 Planning.. 3.2.3 Performing.. 3.2.4 Reporting.. |