Prepared by: Saroj Dangal, ACCA

Contact Info: 9813887080 (WhatsApp, Viber,)

Email: Dangalsaroj05@gmail.com

Saroj Dangal
 INTRODUCTION TO
ASSURANCE
AUDIT AND ASSURANCE

Saroj Dangal
Saroj Dangal
Saroj Dangal
An engagement in which a practitioner obtains sufficient
appropriate evidence in order to express 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

Saroj Dangal
An engagement in which a practitioner obtains sufficient
appropriate evidence in order to express 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

Saroj Dangal
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

Saroj Dangal
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

Saroj Dangal
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

Saroj Dangal
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

Saroj Dangal
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

Saroj Dangal
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

Saroj Dangal
Saroj Dangal
 ELEMENTS OF ASSURANCE ENGAGEMENT

▶Three Party Involvement

• Practitioner
• Responsible Party
• Intended Users
▶Appropriate Subject Matter
▶Suitable Criteria
▶Sufficient Appropriate Evidence
▶Written Assurance Report in an Appropriate Form

Saroj Dangal
 Example of ASSURANCE ENGAGEMENT

 Audit of financial statements

 Review of financial statements
 Systems reliability reports
 Verification of social and environmental information
 Review of internal controls
 Value for money audit in public sector organizations.

Saroj Dangal
 TYPES OF ENGAGEMENT

▶REASONABLE ASSURANCE
ENGAGEMENT(POSITIVE)
▶LIMITED ASSURANCE
ENGAGEMENT(NEGATIVE)

Saroj Dangal
 REASONABLE ASSURANCE

▶ Gathers sufficient appropriate evidence to be able to draw

reasonable conclusions
▶ Concludes that the subject matter conforms in all material respects
with identified suitable criteria
▶ Gives a positively worded assurance opinion
▶ Gives a High Level of assurance(confidence)
▶ Performs very thorough procedures

Saroj Dangal
 Wording for REASONABLE ASSURANCE

▶ In our opinion internal control is effective

▶ The accounts show a true and fair view.
▶ The cash flow forecast is correct
▶ The appointment of the employee is fair

Saroj Dangal
 EXTERNAL AUDIT ENGAGEMENT
(REASONABLE ASSURANCE)

▶ Purpose- To enhance the degree of confidence

of intended users in financial statements (ISA
200 Overall Objectives of the Independent
Auditor and the Conduct of Audit in accordance
with ISAs)
▶ Opinion- Financial Statements show true and
fair view & Financial statements are prepared,
in all material respects , in accordance with
an applicable financial reporting framework.
▶ True- Factually correct information
▶ Fair- Clear, Impartial and Unbiased information
Saroj Dangal
 OBJECTIVES OF AUDITOR

▶ Obtain reasonable assurance about whether the

financial statements as a whole are free from material
misstatement, whether due to fraud or error
▶ Express an opinion on whether the financial statements are
prepared, in all material respects, in accordance with an
applicable financial reporting framework
▶ Report on the financial statements and communicate as
required by ISAs, in accordance with the auditor’s findings

Saroj Dangal
 NEED FOR EXTERNAL AUDIT
▶ Shareholders-Provide Finance and May not be
Involved in Day to Day Management
▶ Directors-Manages company on behalf of
shareholders, must prepare financial statements
and may have various reasons to manipulate the
financial statements and show different level of
performance
▶ Need for An Independent Review

Saroj Dangal
BENEFITS OF EXTERNAL AUDIT

▶Higher quality information

▶Independent scrutiny and verification
▶Reduced Risk of management bias, fraud and error
▶Enhanced credibility of FS
▶Deficiencies in the Internal Control System highlighted

Saroj Dangal
 LIMITATIONS OF AN AUDIT

▶ Inclusion of subjective estimates and judgements in Financial

statements
▶ Reliance on Internal Control Systems which have their own
inherent limitations
▶ Reliance on Management Representations as only source of
evidence in some areas
▶ Persuasive Evidence rather than Conclusive Evidence
▶ Sampling

Saroj Dangal
 LIMITED ASSURANCE

▶ Gathers sufficient appropriate evidence to

be able to draw limited conclusions
▶ Concludes that the subject matter with respect
to identified suitable criteria, is plausible in the
circumstances
▶ Gives a negatively worded assurance opinion
▶ Gives a moderate or lower
level of assurance(confidence)
▶ Performs significantly fewer procedures.

Saroj Dangal
 Wording for LIMITED ASSURANCE

▶ We have discovered nothing wrong with the Financial

Statements
▶ The basis of the forecast is not unreasonable
▶ There is no evidence of discrimination in the appointment

Saroj Dangal
 REVIEW ENGAGEMENT

A Review Engagement

Voluntary

Analytical Procedures

Make Enquiries

Negative Assurance Report Saroj Dangal

 EXPECTATION GAP

Reasonable Absolute

Saroj Dangal
EXPECTATION GAP

▶A belief that auditors test all transactions and

events
▶A belief that auditors are required to detect all fraud
▶A belief that auditor are responsible for preparing the financial
statements

Saroj Dangal
SEPARATION OF OWNERSHIP AND CONTROL

Saroj Dangal
SEPARATION OF OWNERSHIP AND CONTROL

Saroj Dangal
 KEY DEFINITIONS

Accountability
• People in position of power can be held to account for
their actions

Stewardship
• Responsibility to take good care of resources/business

Fiduciary
relationship
• Relationship of good faith , duty of care towards
someone

Saroj Dangal
 Key Take-Aways

(a) Identify and describe the objective and general principles of external audit
engagements. [2]
(b) Explain the nature and development of audit and other assurance
engagements. [1]
(c) Discuss the concepts of accountability, stewardship and agency. [2]
(d) Define and provide the objectives of an assurance engagement. [1]
(e) Explain the five elements of an assurance engagement. [2]
(f) Describe the types of assurance engagement. [2]
(g) Explain the level of assurance provided by an external audit and other
review engagements and the concept of true and fair presentation. [1]
(h) Describe the limitations of external audits.
Saroj Dangal
Thankyou.