ASSERTION-BASED AND DIRECT REPORTING ENGAGEMENTS
In some assurance engagements, the evaluation or measurement of the subject matter is performed bythe responsible party (the preparer of the information), and the subject matter information is in theform of an assertion by the responsible party that is made available to the intended users. Theseengagements are called "assertion-based engagements."In other assurance engagements, the practitioner either directly performs the evaluation ormeasurement of the subject matter, or obtains a representation from the responsible party that hasperformed the evaluation or measurement that is not available to the intended users. The subjectmatter information is provided to the intended users in the assurance report. These engagements arecalled "direct reporting engagements."It is necessary to distinguish between an assertion-based assurance engagement and a direct reportingassurance engagement. An assertion-based assurance engagement requires that auditor to issue anopinion on written assertions made by others. On the other hand, direct-reporting assuranceengagement requires the auditor to provide assurance on an accountability matter on which theresponsible party has not made a written assertion.For example, an audit report could be issue on the adequacy of internal control. Where managementdoes not issue a report on the adequacy of internal control, and therefore the auditor is required toreport directly on its adequacy, the engagement is classed as direct reporting assurance engagement. If,however, management has stated an opinion on the adequacy of internal control and the auditor isrequired to attest to this statement, it is an assertion-based assurance engagement.
ASSURANCE ENGAGEMENT ACCEPTANCE
Acceptance decisions are crucially important, because new clients and/or engagements can pose threatsto objectivity, or create risk exposure to the firm, which must be carefully evaluated. The practitioner(auditor or assurance provider) accepts an assurance engagement only where the practitioner'spreliminary knowledge of the engagement circumstances indicates that:1. The relevant ethical requirements, such as independence and professional competence will besatisfied. The Code of Ethics for Professional accountants requires firm to investigate potential client, itsowners and business activities in order to evaluate whether there are any questions over the integrity of the potential client which may create unacceptable risk. Also, the firm's competence to perform thepotential work should be evaluated, especially if the potential client operates in a specialized industry,or if the client has a complex structure. Practical matters such as the resources needed to perform the