Module 7 Introduction to Assurance Flashcards
What are the key elements of an assurance engagement? CUTER
- Suitable criteria
- An appropriate underlying subject matter
- A three party relationship
- Sufficient, appropriate evidence
- An assurance report
What are the two types of assurances?
Reasonable assurance - positive form and concludes that the subject matters are reasonably free from material misstatement, not absolute level of assurance
Limited assurance - Negative form, concludes that there is no evidence that the subject matter is materially misstated
What are the two commercial risk for auditors taking on a new client?
Financial risk - Risk of financial loss to the firm
Reputational - risk of damage to the firm’s public perception and brand
What are the two professional risk for auditors taking on a new client?
Ethical - the risk that the firm fails (or is seen to fail) to conduct the engagement in a way that is professional and ethical
Legal - the risk that the firm could face criminal or civil legal proceedings
What are the stages of the audit process?
1 - Acceptance - (Audit process stages)
2 - Planning - (Audit process stages)
3 - Systems and Controls analysis - (Audit process stages)
4 - Substantive testing - (Audit process stages)
5 - Completion - (Audit process stages)
6 - Risk assessment (ongoing elements)
7 - Engagement and client management (ongoing elements)
What is the client acceptance procedure?
- Identify the users and nature
- Assess the legal and financial stability
- Assess the integrity of those charged with governance
- Ability to undertake the assurance engagement
- Client identification procedures
- Basis of performance
- Communicate with previous auditor
What document includes the terms of engagement for audits?
The engagement letter
Assurance engagement
An engagment in which a practitioner aims to obtain sufficent appropriate evidence in order to express a conclusion.