Assurance
Assurance is the broad umbrella of that includes attestation
and auditing.
Assurance service: are independent professional services that
improve the quality of information, or its context, for decision
makers.
1. Decision making: Making good decisions requires quality
information, which can be financial or nonfinancial in
nature.
a. 3 types of information present under decision
making model
i. environmental information
ii. Process monitoring and diagnostic
information
iii. outcome feedback information.
b. Assurance services engagement can help the
decision maker to identify which pieces are
relevant for the required decision by using the
information
2. improving the quality of information and its context
a. improve information quality by increasing
confidence in the information’s reliability,
relevance, and timeliness
b. Context can be improved via the format in which
information is presented or through the provision
of other relevant benchmarking information.
3. Independence:
a. Independence is the hallmark of the accounting
profession.
4. professional services
a. Reflects the application of professional judgment to
the information that is the subject of the assurance
service
Types of Assurance Services
• Risk assessment
○ assurance that an entity’s profile of business risks is
comprehensive and evaluation of whether the
entity has appropriate systems in place to
effectively manage those risks.
• Business performance measurement
• Information system reliability
• E-commerce
• Health care performance measurement
ACT3142 [AUD 2] Page 1
Assurance engagement:
• Subject matter and subject matter
information
• Criteria
• Practitioner
• Intended user
• Responsible party
Type of engagement:
• Assertion-based engagements
• Direct reporting engagements
Assurance engagement acceptance:
• Ethical requirements.
• Appropriate subject matter.
• Suitable criteria.
• Sufficient appropriate evidence.
• Practitioner’s conclusion in a written report;
reasonable or limited assurance.
• Rational purpose.
Assurance risk: The risk that the practitioner
expresses an inappropriate conclusion when the
subject matter information is materially misstated.
Reasonable and limited assurance engagements:
→ The level of assurance risk is higher in a
limited assurance engagement than in a
reasonable assurance engagement
→ In a limited assurance engagement the
nature, timing and extent of procedures for
gathering sufficient appropriate evidence are
deliberately less relative to a reasonable
assurance engagement. The practitioner may
obtain evidence primarily by performing
inquiries and analytical procedures.
The practitioner provides a written report
containing a conclusion that conveys the assurance
obtained about the subject matter information.
> A reasonable assurance engagement report
includes a positive form of expression of the
conclusion.
> A limited assurance engagement report
includes a negative form of expression of the
conclusion
The practitioner should issue an assurance report
with a modified conclusion if:
(1) There is a material limitation of the scope of
the practitioner’s work;
(2) the subject matter information is materially
misstated; or
(3) when it is discovered after the engagement
has been accepted that the criteria are
unsuitable or the subject matter is not
appropriate for an assurance engagement.
The materiality and pervasiveness of the effect of
the matter determines if a qualified conclusion, or
an adverse conclusion or disclaimer of conclusion is
required.