CH14 other assurance engagements Flashcards
(21 cards)
What is essential to understand in an assurance engagement?
Requirements and appropriateness for a firm to carry out the engagement
This includes considering the user of the information and the nature of the assertions.
Who should firms consider when conducting an assurance engagement?
The user of the information and their purpose
Consider internal, external, or associated levels of risk.
What factors influence how much assurance can be offered?
Nature of the assertions and method of estimation
Assurance is never absolute, especially on prospective financial information.
What type of information affects the level of assurance provided?
Prospective financial information and hypothetical estimates
Very hypothetical ‘guesses’ may not allow any level of assurance.
What report is required in an assurance engagement?
Specific report details as per the engagement terms
The report may vary based on the type and scope of the engagement.
What is the relationship between prediction period and assurance confidence?
Longer prediction period results in less confidence
This is particularly relevant for prospective financial information.
What skills and resources must a firm have for assurance engagements?
Suitable skills and resources necessary for the specific engagement
More consideration is needed for non-financial information assurance.
What ethical barriers must be considered in an assurance engagement?
Potential conflicts of interest, especially with audit clients
Objectivity must be maintained even in standalone assurance.
What is the purpose of the engagement letter in assurance engagements?
To ensure understanding of the engagement details by both parties
It covers responsibilities, liability, and applicable standards.
What specific assertions might be included in the terms of engagement for a review of prospective financial information?
Caveat that future performance may differ from predictions
This serves to manage expectations regarding the outcomes.
What caveat is likely included in a review of historical information?
The review is NOT an audit
This distinction is important for understanding the scope and limitations of the review.
What types of evidence should an auditor obtain in assurance engagements?
Sufficient and appropriate evidence, normally limited to enquiry, analytical procedures, and recalculation
In the case of financial information, written representations from management about the completeness and accuracy of the information/assumptions/estimates being reviewed are also obtained.
What is essential to understand regarding the evidence obtained in an audit?
The assertions made by management in the financial statements
In assurance engagements, the evidence could relate to a diverse range of matters.
For prospective financial information (PFI), what assertions must be considered?
- Reasonable (aligns with auditor’s understanding of the project or situation)
- Properly prepared (consideration of accounting policies, preparation process, and controls)
Each line of the PFI may need to be evaluated for internal consistency.
What assertions are likely made regarding historical financial information?
- Items are valued appropriately
- Items exist
- Items pertain to the entity
These assertions are similar to those in financial statement assertions.
In other assurance engagements, what do assertions depend on?
The subject matter and the criteria
This highlights the variability of assertions across different types of engagements.
Fill in the blank: Assurance providers obtain _______ from management about the completeness and accuracy of the information being reviewed.
written representations
True or False: The assertions for prospective financial information must always be internally consistent.
True
reporting in other assurance engagements
limited assurance engagement table of possible opinions
