Elisabeth Jane C.

Henanger
Auditing and Assurance Principles (ACT1202)

Why should "Auditing and Assurance Principles" be part of a Bachelor of Science in

Accountancy degree program? List your reasons.
Auditing and Assurance Principles should be part of the BSA program because it will be useful
to students in the future. This will help us develop our critical thinking and analytic skills and
hone us in this field where reliable and credible information is necessary. In addition to that, The
course is relevant for students to become familiar with the instances that they might encounter in
the actual practice and clarifies the responsibilities assumed by company management and by the
auditor. By studying auditing theory, students can also acquire skills and develop a
professionally skeptical attitude that can be used in their day-to-day activities, such as assessing
one's academic performance verifying news.

What is assurance? What are assurance engagements?

Assurance refers to the auditor's satisfaction as to the reliability of an assertion being made by
one party for use by another party. Assurance services or assurance engagements are independent
professional services intended to enhance the credibility of information to meet the needs of
intended users. Also, Assurance engagements are three-party contracts in which practitioners or
insurers (such as CPA) report on the quality of information. These include assertion-based
services such as audits and reviews of financial statements and direct reporting engagements.

What is the objective of an assurance engagement?

The objective of an assurance engagement is to enhance the credibility of information to improve
the likelihood that the information will meet the needs of intended users and make economic
decisions.

Describe the nature of the following assurance services: Business Performance

Measurement; Health Care Performance Measurement; Elder Care Plus; Risk Assessment
Services; CPA Web Trust; Information Systems Reliability
Assurance Services
Business Performance Measurement - assure whether financial and non-financial information
being reported from the entity's performance measurement system (e.g., balanced scorecard) is
reliable and whether the performance measures being used are accurately leading the entity
toward meeting its strategic goals and objectives.
Health Care Performance Measurement involves evaluating the quality of health care,
medical services and outcome.
ElderCare Plus - – focuses on the needs of the elderly and whether caregivers are providing
services that meet the specified objectives or at an acceptable level.
Risk Assessment Services - involves the study of the link between risks and organization's
vision, mission, objectives and strategies and development of new and relevant measures to
address these risks.
CPA Web Trust - assure users of web sites in the Internet. Enables to purchase goods and
services online.
Information Systems Reliability - provides assurance that the information system has been
designed and operated to produce reliable data, including tests of the system to determine
whether the system protects against potential causes of data defects.

Enumerate the five elements of assurance engagements. For each element, provide a brief
explanation.
Three-party relationship – This involves a practitioner (broader than the term "auditor"), a
responsible party (a private company, a government entity, etc.), and an intended user (often
members of the public or investors or regulatory bodies)
An appropriate subject matter – Identifiable and capable of consistent evaluation or
measurement against the identifiable criteria, and such that the information about it can be
subjected to procedures for gathering sufficient appropriate evidence to support a reasonable
assurance or limited assurance conclusion, as appropriate.
Suitable criteria – The benchmarks used to evaluate or measure the subject matter, including,
where relevant, benchmarks for presentation and disclosure.
Sufficient appropriate evidence – Sufficiency is the measure of the quantity of evidence.
Appropriateness is the measure of the quality of evidence that is relevant and its reliability.
A written assurance report in the form appropriate to a reasonable assurance engagement
or a limited assurance engagement.
Explain why suitable criteria are essential to the successful performance of an assurance
engagement.
 Suitable criteria are essential to the successful performance of an assurance engagement
to have a reasonably consistent evaluation or measurement of a subject matter within the
context of professional judgment.
 Should be context-sensitive and relevant to the engagement circumstances, or any
conclusion is open to individual interpretation and misunderstanding.

Define the following:

Reasonable level engagements - Reduction in assurance engagement risk to an acceptably low
level in the circumstances of the engagement as the basis for a positive form of expression of the
practitioner's conclusion
Limited level engagements – Reduction in assurance engagement risk to a level that is
acceptable in the circumstances of the engagement, but where the risk is greater than for a
reasonable assurance engagement, as a basis for a negative form of expression of the
practitioner's conclusion
The responsible party performs attestation engagements – the evaluation or measurement of
the subject matter. The subject matter information is in the form of assertion by the accountable
party made available to the intended users.
Direct engagements – the practitioner either directly performs the evaluation or measurement of
the subject matter or obtains a representation from the responsible party that has performed the
evaluation or measurement that is not available to the intended users. The subject matter is
provided to the intended users in the assurance report.

Is absolute assurance possible? Explain.

Absolute assurance is not possible because there are limitations that restrict the auditor to obtain
only reasonable assurance.

What is attestation? Give examples of attest engagements.

Attestation is an engagement in which a practitioner is engaged to issue, or does issue, a written
communication that expresses a conclusion about the reliability of a written assertion that is the
responsibility of another party.
Examples include audits and review engagements.

Identify at least three non-assurance engagements. Describe each one briefly.

 Agreed-upon procedures – an engagement in which the auditor is engaged to carry out
those procedures of an audit nature to which the auditor and the entity and any
appropriate third parties have agreed and report on factual findings.
 Compilation of financial or other information – an engagement in which the accountant is
engaged to use his accounting expertise instead of auditing expertise to collect, classify
and summarize financial information.
 Tax services – A kind of service where individuals seek help from CPAs to develop tax
strategies on their income and business tax to legally minimize their tax liabilities. A non-
assurance service if tax returns are prepared with no conclusion expressed.