Module 7 - Introduction to Assurance Flashcards
(10 cards)
Assurance is…
Gather and obtain evidence
…to provide confidence on the subject matter
Elements if assurance engagement?
CUTER
Three party relationship - practitioner, responsible party, intended users
Appropriate underlying subject matter - could be financial performance, behaviour, non-financial data
Suitable criteria - criteria are benchmarks used to evaluate or measure the underlying subject matter. Such as IFRS, company code of conduct. Required for consistency
Sufficient, appropriate evidence - practitioner plans and performs assurance engagement with scepticism. Considers materiality, engagement risk, quality if available evidence
Assurance report - written report containing a conclusion that conveys the assurance obtained about subject matter information
Reasonable assurance
Practitioner reduces engagement risk to an acceptably low level in order to give an opinion on the subject matter
Expressed in the positive form
Not guarantee of 100% accurate
Enough evidence to say free from major issues
Like a car MOT, not everything is checked
Limited assurance
Higher level of risk, work is less rigorous than reasonable
Less reliance, negative form (nothing has come to attention)
No evidence that subject mater is materially mistated
Commercial risks to accept a client…
Financial - risk of financial loss to the firm
Reputational - risk of damage to the firm’s public perception and brand
Professional risks to accept a client engagement include…
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
Acceptence is…
Taking on a new client that did not provide assurance for the year before
Acceptence procedures…
Identify users and nature of engagement
Assess the clients legal and financial stability
Assess integrity of those charged with governance, management and principal owners
Evaluate firms ability to undertake the assurance engagement - ethically and practically
Perform client identification procedures
Agree the basis for performance of the engagement
Timing of an audit process
Engagement letter is…
Contract of terms after engagement has been accepted
Must be signed by practitioner and the client
