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Flashcards in 10 - Assurance and Other Enagements Deck (27)
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1

Agreed upon procedures?

Specified in engagement letter
Does not make any judgements
No opinion or conclusions
Restricted to those who have agreed since others may misinterpret

2

Compliance engagements?

Accounting expertise
No opinion provided
Preparation of financial statements commonly included
Collection/classification/summary of financial info

3

What is an assurance engagement?

Practitioner aims to obtain sufficient appropriate evidence to express a conclusion designed to enhance the degree of confidence of the intended users

4

Objectives of an assurance engagement?

Enhance the credibility of the underlying subject matter

Doesn’t have to be financial

Public interest element

5

Elements of an assurance engagement?

Criteria (suitable)
Underlying subject matter
Three party relationship
Evidence (sufficient)
Report (assurance report)

6

Three party relationship?

Practitioner
Responsible party
Intended used

7

Suitable criteria?

Relevant, complete, reliable, neural and understandable

8

Sufficient and appropriate audit evidence

Professional scepticism
Free form material misstatement
Materiality
Engagement risk
Quality
Quantity

9

Types of assurance engagements?

Reasonable assurance
Limited assurance

10

Reasonable assurance?

Engagement risk acceptably low
Positive opinion
Reasonably certain free from material misstatement

11

Limited assurance?

Level of risk higher than reasonable assurance engagement
Opinion expressed in negative form - no evidence that the financial statements are materially misstated

12

Processes of an assurance engagement?

Acceptance and continuance
Planning (inc risk assessment)
Systems and controls analysis
Collection of evidence (Substantive testing)
Completion (inc reporting)

13

Acceptance and continuance considerations?

Commercial - financial and reputational risks

Professional - non compliance

Consider for whom and what purpose report is prepared

14

4 outcomes when assessing third party liability

Accept duty of care and include third party in engagement letter
Ensure third party confirms there is no duty of care
Include a disclaimer of liability to any third party
Reject engagement

15

Can only accept engagement if it exhibits?

Ethical requirements
Competence and capable to carry out
Basis agreed - common understandings and preconditions

- roles and responsibilities
- underlying subject matter
- suitable criteria
- available to intended users
- evidence
- written report
- rational purpose

16

What does an engagement letter do?

Clarifies responsibilities
Scope
Form of report
Work that will be performed

Contract of work

17

Minimum content of an assurance engagement report?

Title
Addressee
Identify and describe level of assurance obtained
Criteria
If needed describe limitation
Identify responsible party and responsibilities
Statement performed in accordance with ISAEs
Adhered to standards
Summary of work
Conclusion
Signature
Date
Location of practice

18

Factors considered for other engagements?

Parties
Subject matter
Criteria
Procedures
Type of report

19

Half yearly report

May choose to have reviewed
Timeliness
Estimated to a greater extent

LIMITED ASSURANCE ENGAGEMENT
Lower level
Less work
Less costly

Evidence through enquiry and analytical procedures
Engagement letter

No audit opinion in written report

20

Prospective financial information

Assumptions about events in future

Forecasts - prospective financial info on basis of assumptions on events management expect to happen
Projections - hypothetical assumptions

Subjective
Moderate level of assurance through negative opinion

21

When examining prospective finance info the auditor should consider?

Reasonableness of assumptions
Correct application
Disclosure
Consistency of accounting principles
Obtaining Written representations

22

Prospective financial info report should include?

Statement anything has come to attention that not reasonable
Opinion on whether properly prepared
Actual results likely to be different
Statement on set of assumptions and not necessarily expected to occur - in case of projection

23

Forensic auditing?

Application of auditing skills to situations that have legal consequences

E.g investigation of fraud

Reactive or proactive

24

XBRL tagging?

Inline XBRL format must be used to deliver company tax returns electronically to HMRC

In f/a have computer readable tags

Taxonomy - library of codes
Review accuracy of this tagging e.g agreed upon procedures engagement

25

Due diligence engagements

Most commonly performed when one company planning to take over another

Advise on risks
No specific guidance

- legal
- tax
- operations
- financial info

26

Accounting services associated with listings?

LSE Listing Rules require a prospectus
- info investors and advisers need and expect to allow to make informed assessment

Need - unqualified FS, interim info if last accounts more than 6m a go, optional profit forecast info

27

Public interest engagements?

Best value audits - Scotland public bodies, statutory duty in local government and formal duty in rest of public sector

Corporate and performance assessment

Outcomes
Effectiveness of partnership
Service performance and use of resource
Risk based approach
Clear and transparent audit
Improvement and good practice