Chapter 1: Introduction to Assurance Services

Question 1

Relationship between shareholders and directors/management?

Answer 1

ASA

Stewardship (Managing others person property)
Agent (Acts on behalf of principal)
Accountable (Directors are accountable to shareholders)

Question 2

Advantages of statutory audit?

Answer 2

MD SSPL / SAS LCD

S(Sale or purchase of business)
A(Auditor)
S(Statutory dudies and non-statutory duties)

L(Grant loan from bank)
C(Increase Credibility)
D(Deficiencies in internal control system)

Question 3

Definition of assurance engagement?

Answer 3

P E^2 S^2 C I (PEPSI)

P(Practitioner)
E(Evidence)
E(Evaluate)
S(Subject matter)
S(Suitable criteria)
C(Conclusion)
I(Intended users)

Question 4

Elements of assurance engagement

Answer 4

CREST

C(Suitable Criteria)
R(Written Assurance Report)
E(Evidence)
S(Subject Matter)
T(Three party relationship)

Question 5

Define non-assurance engagement

Answer 5

CREST

if any of the above element is missing then it is called non-assurance engagement.

Question 6

Why absolute assurance cannot be provided / What are inherent limitations of audit?

Answer 6

NPN LST

N(Nature of financial statements)
P(Procedures of audit based on judgement)
N(Nature of audit procedures)
S(Staff may not be available)
L(Inherent limitation of internal control system of client)

Question 7

Limited Assurance?

Answer 7

Low level of assurace, Express in negative form.

Based on our review, Nothing has come in our attention that causes us to believe that financial statements donot give true and fair view.

Question 8

Reasonable Assurance?

Answer 8

Moderate level of assurance, Express in positive form.

In our opinion, Financial statements give true and fair view.