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ASSURANCE ENGAGEMENTS AND RELATED SERVICES
AUDIT OF FINANCIAL STATEMENTS
OBJECTIVE: Is conducted primarily to enable the auditor to express an opinion on the entitys
financial statements.
LEVEL OF ASSURANCE: The auditor provides the users with a high level of assurance (reasonable
assurance) that the financial statements are free from material misstatements. The audit procedure
is enabling the auditor to gather sufficient appropriate audit evidence to be able to express an
opinion (positive assurance) about the fair presentation of the financial statements.
If the accountant feels that the modification of the report is not sufficient to describe
the PFRS departures and the client is not willing to correct these deficiencies, the
accountant may withdraw from the engagement.
SCOPE LIMITATION
Will normally cause the accountant to withdraw from the engagement.
ASSURANCE ENGAGEMENTS
PSA 300 states that assurance engagements are intended to enhance the credibility of information
about a subject matter by evaluating whether the subject matter conforms in all material respects with
suitable criteria.
TWO TYPES OF ASSURANCE ENGAMENT
Reasonable assurance engagement = audit engagement
Limited assurance engagement = review engagement
EVIDENCE
To determine whether the assertions are free of material misstatement.
ASSURANCE REPORT
The professional accountants conclusion provides either high or moderate level of
assurance about the subject matter.
Not all engagements performed by professional accountants are assurance engagements.
NOT AN ASSURANCE ENGAGEMENT:
Agreed upon procedures
Compilation of financial or other information
Preparation of tax returns when no conclusion is expressed, and tax consulting
Management consulting
Other advisory services
AUDITORS RESPONSIBILITY
The auditor should evaluate the completeness and reasonableness of the underlying assumptions
as disclosed in the prospective financial information.
When examining prospective financial information, according to PSAE 3400, the auditor should obtain
sufficient appropriate evidence that:
Managements best-estimate assumptions are reasonable and, in the case of hypothetical
assumptions, such assumptions are consistent with the purpose of the information;
The prospective financial information is properly prepared on the basis of the assumptions;
The prospective financial information is properly presented and all material assumptions are
adequately disclosed; and
The prospective financial information is prepared on a consistent basis with historical financial
statement.
When evidence may be available to support the assumptions on which the financial information is based,
such evidence is itself generally future oriented and speculative in nature. The auditor is, therefore, not in
a position to express an opinion as to whether the results shown in the prospective financial information
will be achieved.
When reporting on the reasonableness of managements assumptions, the auditor normally provides only
a moderate level of assurance.