Dizon, Mary Jane S.

A-331
Internal Auditing (Auditing and Assurance Principles)-6165

The following are the Journal Questions for this module:

1. What is “Assurance”? Explain the value we obtain from lay man’s assurance.
Assurance is given as a product of certainty about a particular matter which gives
us a presumption of accuracy and truthfulness. It is like informing another party how
confident the person is in his/her position or point of view. Assurance gives rest to
people’s minds by clearing their doubts and convincing them that nothing should be
worried about. This word is often associated with a romantic relationship especially
during times of uncertainty where they are no longer sure of their feelings. Assurance
brings people at ease because it serves as a guarantee that we can put our trust on.
2. What is an Assurance Engagement?

Assurance engagement is a process of procuring sufficient and appropriate

evidence that allows professional independent accountants to arrive with a conclusion
regarding the examination of a subject matter against required guidelines (Clean Energy
Regulator, n.d.). A high level of assurance brings a higher level of confidence to the
intended users.

3. Why do we conduct Assurance Engagements? Why is it an essential function in the

practice of our profession?
The primary goal of an assurance engagement is to come up with a conclusion
that expresses the level of confidence on how a subject matter complies with a set of
standards through the assessment of evidence (Wiki Accounting, n.d.). This is an
essential function in our accounting profession because risks of material misstatement
due to mistakes and errors that occur in recording and summarizing financial
information are inevitable and should be reduced. This function is vital as well in the
prevention of fraud through the examination of evidence to verify the accuracy of
financial reports.
4. Differentiate the following:
1. Reasonable Assurance Engagement and Limited Assurance Engagement
The difference between Reasonable Assurance Engagement and Limited
Assurance Engagement lies in their level of confidence. Reasonable Assurance
Engagement has a high level of assurance and expresses its conclusion in a positive
form in which the assurance engagement risk is decreased to an acceptable low level
(Wiki Accounting, n.d.). While limited assurance engagement performs its work
depending on the need of the intended users and expresses its opinion in a negative
form.
Dizon, Mary Jane S.
A-331
Internal Auditing (Auditing and Assurance Principles)-6165

2. Assertion-based Engagements and Direct Reporting Engagements

In assertion-based engagements, the subject matter information which
includes responsible party’s assertion are known to the intended users (ICAEW, n.d.). In
direct reporting engagements, the subject matter information is not yet presented to the
intended users. The practitioner himself/herself performs direct or first-hand evaluation
because there is no existing basis yet for the information needed.
5. What are the Elements of an Assurance Engagement? Give and explanation and
include why such element is necessary in the completion of such engagement.
 Three party relationship - It includes the practitioner, responsible party, and
intended users. The practitioner is usually the professional independent
accountant or professional audit firm that performs assurance services (Wiki
Accounting, n.d.). The responsible party is the one who is responsible for the
subject matter information or the assertion. While, the intended users are the
stakeholders who are the users of the reports. These three parties are necessary
for the completion of the engagement because it will not take place in the first
place without the intended users who are the cause why the responsible party
engages the practitioner to do the work.

 Appropriate subject matter – It is a particular object that can be examined against

a certain standard or requirement. Completion of the engagement will not happen
if there is no particular object who will be assessed in order to get the information
needed to arrive at a conclusion.

 Suitable criteria – It is the designed standards or guidelines that should be

followed in order for the presentation to be according to the users’ needs. This is
the basis for the examination made by the practitioner. Without criteria the
engagement will not be completed because the assessment and observation will
have no convention that lets the practitioner check whether the subject matter
conforms to it or not.

 Sufficient and appropriate evidence – It is the grounds of the conclusion made by

the practitioner in the assurance engagement. Professional skepticism should be
practiced by the accountant in obtaining evidence in order to make sure that they
are sufficient and appropriate. It is vital in the completion of the engagement that
there is sufficient and appropriate evidence because it supports the reliability of
the information obtained.
Dizon, Mary Jane S.
A-331
Internal Auditing (Auditing and Assurance Principles)-6165

 Written Assurance Report – This is the product of the engagement performed by

the practitioner where the conclusion is presented in a written report. This is a
must in the completion of the engagement because the conclusion derived must
be indicated and the assurance obtained must be communicated well in order for
the intended users to understand it better.

6. What are non-assurance services? Give examples and explain.

Non-assurance services are engagements that do not require the practitioner to
state an opinion or conclusion about the subject matter. The practitioner cannot certify if
it is misstated or not because he/she should solely focus on performing the task which
was asked for him/her to do.
 Accounting and Bookkeeping – It is the process of recording and classifying
financial transactions in order to summarize them into financial statements.
 Tax services – It deals with tax compliance such as preparation of tax returns
and tax planning where they think of ways that they can legally reduce the tax to
be paid.
 Management consulting services – It concerns services for the sake of a
business entity to ensure efficient and harmonious operation in the management
that will bring positive effects in the performance of the business. 
Dizon, Mary Jane S.
A-331
Internal Auditing (Auditing and Assurance Principles)-6165

References:
Clean Energy Regulator. (n.d.). Levels of assurance explained.
http://www.cleanenergyregulator.gov.au/Infohub/Audits/Pages/Forms%20and
%20resources/Audit%20determination%20handbook/Levels-of-assurance-
explained.aspx
Wiki Accounting. (n.d.). What is the objective of assurance engagement?
https://www.wikiaccounting.com/what-is-the-objective-of-assurance-engagement/
ICAEW. (n.d.). Attestation vs direct reporting. https://www.icaew.com/technical/audit-
and-assurance/assurance/process/scoping/assurance-decision/attestation-vs-
direct-reporting