Galang, Marnel Jasper A.

(A-331) (AAPRINCIPLES)

1) What is Auditing?

CFI (2020) defined auditing as an objective measurement commonly done by an

external third party to the financial statements of companies. In line with this, ADOA-

GAO (n.d.) gives meaning to auditing as doing an evaluation on the subject matter and

verify if this subject matter is recorded against the establish guidelines, policies, and

procedures. Subsequently, the objective of auditing is for the auditor using his analytical

skills, professional judgment, and professional skepticism obtains and evaluates

evidence to report a positive opinion whether the financial statements are prepared and

presented fairly in accordance with the appropriate criteria (Cabrera and Cabrera, 2017,

p.177).

2) Differentiate the following:

 Assurance Engagements

The International Framework for Assurance Engagements clearly defined

assurance engagement as an engagement in which a practitioner obtains appropriate

sufficient evidence to expresses a conclusion designed to enhance the degree of

confidence of the intended users other than the responsible party about the outcome of

the evaluation or measurement of a subject matter against criteria.

 Assurance Services

Assurance services are types of independent professional services usually done

by Certified Public Accountants to improve the quality of information. Through

assurance services, information risk is reduced aiding the intended users in their
Galang, Marnel Jasper A. (A-331) (AAPRINCIPLES)

decision making. Businesses use assurance services to prove their claims about their

business operations thus getting the trust of the investors and creditors. (Hayes, 2020)

 Attestation Services

Attestation services are subset of assurance services wherein the practitioner

provides an attestation report with conclusions about the reliability of the data of the

subject matter information presented by another party (Cabrera and Cabrera, 2017,

p.15). Example of this is when a certified public accountant (CPA) expresses a

conclusion about the reliability of a company's financial statements (Shelton, 2017)

 Audit Engagements

Fazal, H. (2013) stated that all audit engagements are assurance engagements

but not all assurance engagements are audit engagements. In line with this, he

described that an assurance engagement can be considered as audit engagement if it

provides a reasonable level of assurance and expresses a positive opinion.

Furthermore, the time and resources used in audit engagement is higher than any other

assurance services as auditor has made extensive examination.

 Financial Statements Audit

Financial Statements Audit is a type of audit engagement which involves the

evaluation of the truth and fairness of the financial statements of a management by an

independent external auditor in accordance with PFRS. Its purpose is to add credibility

to the reported financial position and performance of a business and provide reasonable

assurance to the intended user.(accountingsimplified, n.d.)

Galang, Marnel Jasper A. (A-331) (AAPRINCIPLES)

3) Why do we perform Financial Statements Audit? What is its importance and for

whom do we perform such?

The need for Financial Statements Audit primarily comes from the separation of

ownership and control usually in large companies in which directors manage the

company on the part of the shareholders or when the owner of the business assigned

one department of the business to prepare financial statements. As the management

presented the financial statements of the company, the owner or shareholders required

assurance over the reliability of the financial statements before fully trusting them.

Financial Statements Audit made by independent auditor provides reasonable

assurance to the owner or shareholders of the company that the financial statements,

prepared by the management, are free from material misstatements. This also helps the

company in gaining the trust of the lenders, creditors, and suppliers.

(accountingsimplified, n.d.)

4) Who can perform a financial statements audit?

To increase the degree of confidence in the financial statements, a qualified

external auditor (independent of the organization) conducted an evaluation to the

financial statements, including related disclosures presented by management, to

provide their professional opinion on whether the financial statements (income

statement and balance sheet) of the business in all material respects were free from

material misstatement and in accordance with relevant GAAP. (pwc, 2013)

Galang, Marnel Jasper A. (A-331) (AAPRINCIPLES)

Reference List

accountingsimplified (n.d.). Types of Audit Engagements.

Retrieved from: https://accounting-simplified.com/audit/introduction/types-of-audits/

ADOA-GAO (n.d.). What is Auditing?

Retrieved from: https://gao.az.gov/what-auditing

Cabrera, M. E. B., & Cabrera, G. A. B. (2017). Principles of Auditing and Assurance

Services (2020th-2021 ed. ed.). GIC Enterprises & Co., Inc

CFI (2020). What is Auditing?

Retrieved from:

https://corporatefinanceinstitute.com/resources/knowledge/accounting/what-is-an-

audit/

Fazal, H. (2013). What is the difference between Audit engagement and Assurance

engagement? Retrieved from: https://pakaccountants.com/difference-between-

audit-and-assurance-engagement/

Hayes, A. (2020). Assurance Services.

Retrieved from: https://www.investopedia.com/terms/a/assurance-

services.asp#:~:text=Key%20Takeaways-,Assurance%20services%20are%20a

%20type%20of%20independent%20professional%20service%20usually,of

%20information%20for%20decision%2Dmakers.
Galang, Marnel Jasper A. (A-331) (AAPRINCIPLES)

IAASB Handbook (2010). International Framework for Assurance Engagements.

Retrieved from: https://www.ifac.org/system/files/downloads/b003-2010-iaasb-

handbook-framework.pdf

pwc (2013). Understanding a financial statement audit.

Retrieved from: https://www.pwc.com/gx/en/audit-

services/publications/assets/pwc-understanding-financial-statement-audit.pdf

Shelton, H. (2017). Attestation Services: The Tools That May Help You Avoid an Audit.

Retrieved from: https://www.americanexpress.com/en-us/business/trends-and-

insights/articles/attestation-services-the-tools-that-may-help-you-avoid-an-

audit/#:~:text=Attestation%20services%20are%20when%20a,level%20called%20a

%20financial%20audit.