Assurance

It is an engagement when one party appoints another party to provide the

satisfaction (confidence) to another party in order to increase the confidence
of another party and reducing the level of risk.

NOTE:-

Assurance and Audit 1 By:- Haris Hanif

5 Elements of Assurance Engagement
(1) Three Parties
- Intended User:
The individual or class of individual who need the assurance.

- Responsible party:
The party whose work is being assessed by the practitioner.

- Practitioner:
The one who provides the assurance to the intended user and should be independent and
expert in the relevant field.

(2) Subject Matter

This involves any data which is being evaluated by the practitioner for the purpose of
assurance to the intended user.

(3) Criteria
These are the parameter (or Standards/criteria) against which the subject matter is being
evaluated by the practitioner.

(4) Evidence
These are all the information and explanation collected by the practitioner by applying
suitable procedures on the given subject matter and those evidences should be
sufficient (Quantity) and appropriate (Quality).

(5) Assurance Report

This is the written report by the practitioner containing the assurance (opinion) on the
subject matter, being addressed to the intended user.

Assurance and Audit 2 By:- Haris Hanif

International Standards
• IAS (International Accounting Standards)

• IFRS (International Financial Reporting Standards)

• ISAE (International Standards on Assurance Engagement)

• ISA (International Standards on Audit)

• ISRE (International Standards on Review Engagement)

Levels of Assurance
ISAE (International Standards on Assurance Engagement)

• Absolute Assurance (Guarantee)

• Reasonable Assurance

• Limited/Moderate Assurance

Reasonable Assurance

Limited/Moderate Assurance

Assurance and Audit 3 By:- Haris Hanif

Examples of Reports

POSITIVE REPORT

• In our opinion, _____________ gives True and Fair View.

• In our opinion, _____________ do NOT give True and Fair View.

NEGATIVE REPORT

Nothing has come to our attention which causes us to believe that __________ is NOT True and Fair.

EXTERNAL AUDIT

Assurance and Audit 4 By:- Haris Hanif

5 Elements of AUDIT Engagement
(1) Three Parties
- Intended User:

- Responsible party:

- Practitioner:

(2) Subject Matter

(3) Criteria

(4) Evidence

(5) Assurance Report

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Advantages of Audit
• It provides satisfaction to shareholders.

• It adds credibility in the financial statements.

• It also assist other stakeholders in making the economical decision, based on the financial
statements.

• It enables the auditor to give constructive advice to the management on the system
improvements.

Limitations of Audit
• There is limited time to do audit.

• Auditor works on sample basis and possible chances are that the sample which is ignored
may contain the misstatements.

• Evidences may be persuasive, rather than conclusive.

• Audit is not the objective work, judgements have to be made and auditors’ judgement may
not be appropriate sometimes.

ASSURANCE

AUDIT Engagement REVIEW Engagement

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Review Engagement
It is the voluntary exercise in which a practitioner is engaged to evaluate the subject matter
other than financial statements (like internal controls) and applied limited procedures
mainly Inquiry and Analytical procedures and expresses the limited assurance in the form of
Negative report.

TYPES OF REVIEW ENGAGEMENT

(1) Direct Engagement
This is the engagement in which the practitioner evaluates the subject matter with the
limited procedures and then concludes the opinion.

(2) Attestation Engagement

This is the engagement in which the practitioner does NOT evaluate the subject matter, but
the practitioner ensures whether the information is free from material misstatements and
then grid the stamp as attested.

Non – Assurance Engagement

This is the engagement, in which the practitioner is engaged but NO ASSURANCE is
provided.
(1) Agreed upon procedures
This is the engagement in which practitioner is engaged to collect the facts and figures on
certain subject matter with some agreed procedures, but NO OPINION will be given, the
users will draw the opinion by themselves.

(2) Compilation Engagement

This is the engagement in which the practitioner is engaged to compile the information, but
NO ASSURANCE is given.
Example, Tax return compilation.

Assurance and Audit 7 By:- Haris Hanif