Flashcards in 10 - Assurance and Other Enagements Deck (27)
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
No opinion provided
Preparation of financial statements commonly included
Collection/classification/summary of financial info
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
Objectives of an assurance engagement?
Enhance the credibility of the underlying subject matter
Doesn’t have to be financial
Public interest element
Elements of an assurance engagement?
Underlying subject matter
Three party relationship
Report (assurance report)
Three party relationship?
Relevant, complete, reliable, neural and understandable
Sufficient and appropriate audit evidence
Free form material misstatement
Types of assurance engagements?
Engagement risk acceptably low
Reasonably certain free from material misstatement
Level of risk higher than reasonable assurance engagement
Opinion expressed in negative form - no evidence that the financial statements are materially misstated
Processes of an assurance engagement?
Acceptance and continuance
Planning (inc risk assessment)
Systems and controls analysis
Collection of evidence (Substantive testing)
Completion (inc reporting)
Acceptance and continuance considerations?
Commercial - financial and reputational risks
Professional - non compliance
Consider for whom and what purpose report is prepared
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
Can only accept engagement if it exhibits?
Competence and capable to carry out
Basis agreed - common understandings and preconditions
- roles and responsibilities
- underlying subject matter
- suitable criteria
- available to intended users
- written report
- rational purpose
What does an engagement letter do?
Form of report
Work that will be performed
Contract of work
Minimum content of an assurance engagement report?
Identify and describe level of assurance obtained
If needed describe limitation
Identify responsible party and responsibilities
Statement performed in accordance with ISAEs
Adhered to standards
Summary of work
Location of practice
Factors considered for other engagements?
Type of report
Half yearly report
May choose to have reviewed
Estimated to a greater extent
LIMITED ASSURANCE ENGAGEMENT
Evidence through enquiry and analytical procedures
No audit opinion in written report
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
Moderate level of assurance through negative opinion
When examining prospective finance info the auditor should consider?
Reasonableness of assumptions
Consistency of accounting principles
Obtaining Written representations
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
Application of auditing skills to situations that have legal consequences
E.g investigation of fraud
Reactive or proactive
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
Due diligence engagements
Most commonly performed when one company planning to take over another
Advise on risks
No specific guidance
- financial info
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