Chapter 21

Question 1

Assurance services

Answer 1

Independent professional services that improve the quality of information, or its context, for decision makers.

Question 2

The AICPA, through its Assurance Services Executive Committee, initially identified and developed six general categories of assurance services:

Answer 2

A. Risk assessment—assurance that an entity’s profile of business risks is comprehensive and evaluation of whether the entity has appropriate systems in place to effectively manage those risks.

B. Business performance measurement—assurance that an entity’s performance measurement system contains relevant and reliable measures for assessing the degree to which the entity’s goals and objectives are achieved or how its performance compares to that of competitors.

C. Information system reliability—assurance that an entity’s internal information systems provide reliable information for operating and financial decisions.

D. Electronic commerce—assurance that systems and tools used in electronic commerce provide appropriate data integrity, security, privacy, and reliability.

E. Health care performance measurement—assurance about the effectiveness of health care services provided by HMOs, hospitals, doctors, and other providers.

F. PrimePlus—assurance that specified goals regarding the elderly are being met by various caregivers.

Question 3

Attest Services

Answer 3

Occur when a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or an assertion about subject matter that is the responsibility of another party.

Question 4

Attestation standards generally provide for three types of engagements:

Answer 4

Examination
Review
Agreed-upon procedures.

Question 5

Examination

Answer 5

In an examination, the accounting practitioner expresses an opinion that (a) the subject matter is based on (or in conformity with) the criteria in all material respects or (b) the assertion is presented (or fairly stated), in all material respects, based on the criteria. The practitioner’s opinion may be used for general or limited distribution. If distribution is limited, the opinion must state the limitations on the use of the report.

Question 6

Review

Answer 6

In a review engagement, the practitioner does not express an affirmative opinion but rather expresses negative assurance. That is, the accountant indicates that no information came to his or her attention indicating (a) that the subject matter is not based on (or in conformity with) the criteria in all material respects or (b) that the assertion is not presented (or fairly stated), in all material respects, based on the criteria. Distribution of a review report can also be either general or limited. A review engagement should provide sufficient evidence to limit the attestation risk to a moderate level.

Question 7

Agreed-Upon Procedures

Answer 7

An agreed-upon procedures engagement is one in which a practitioner is engaged by an entity to issue a report of findings based on specific procedures performed on the subject matter. The level of assurance provided by such an engagement depends on the nature and scope of the procedures that are agreed by the specified parties. Thus, for agreed-upon procedures engagements, acceptable attestation risk is a function of the intended level of assurance. Distribution of the report based on such an engagement is always limited to the specified users privy to the agreement. The report on an agreed-upon procedures engagement simply summarizes findings from the application of the agreed-upon procedures; it does not include an opinion.