ASSURANCE AND

RELATED SERVICES

SOURCE: AUDITING THEORY 2021 EDITION

(AUTHOR: JEKELL SALOSAGCOL, MICHAEL TIU,
ROEL HERMOSILLA)
When a professional accountant is associated with the
financial statements, some procedures must be performed in
connection with those statements.

The four types of services that are normally performed

in connection with the entity’s financial statements are:

 AUDIT
 REVIEW
 COMPILATION
 AGREED-UPON PROCEDURES
 AUDIT OF FINANCIAL STATEMENTS

• conducted primarily to enable the auditor to express an

opinion on the entity’s financial statements.
• auditor provides the users with high level of assurance
(reasonable assurance) that the financial statements are
free from material misstatements
• positive assurance opinion.

BASIC PROCEDURES
 Risk assessment procedures
 Test of controls
 Substantive tests
 REVIEW OF FINANCIAL STATEMENTS

• CPA reports whether anything has come to his

attention that indicate that the financial statements
are not presented fairly.
• obtain limited assurance about whether the
financial statements as a whole are free from
material misstatement.

PROCEDURES TO BE PERFORMED

• required the CPA practitioner to make appropriate

inquiries of management and others within the
entity and applying analytical procedures.
 REPORTING RESPONSIBILITY

• the review report should contain a clear written

expression of negative assurance.

THE UNMODIFIED CONCLUSION

• expressed when the practitioner has obtained limited

assurance to be able to conclude that there are no
material modifications made to the financial
statements in conformity with Philippine Financial
Reporting Standard.
 MODIFICATION OF THE REVIEW REPORT

A. Material Misstatements
 Qualified conclusion
 Adverse conclusion

B. Scope and Limitation

 Qualified conclusion
 Disclaim a conclusion
 COMPILATION OF FINANCIAL STATEMENTS

OBJECTIVES
• CPA use accounting expertise, as opposed to
auditing expertise, to collect, classify and
summarize financial information.
• Assist client in preparing of financial statements.

COMPILATION ENGAGEMENT
 Not an assurance engagement.
 Does not require the CPA practitioner to verify
the accuracy or completeness of the information
provided by management.
The CPA is not required to:

a. Make any inquiries of management to

assess the reliability and completeness of the
information provided.
b. Assess internal Controls.
c. Verify any matters.
d. Verify any explanations.
 LEVEL OF ASSURANCE
Compilation engagement are not designed and
do not enable the CPA to express any
assurance on the financial information.

REPORTING RESPONSIBILITY
CPA’s compilation report should identify the
financial statements compiled and should
clearly indicate that no assurance is provided on
the financial statements.
 AGREED-UPON PROCEDURES
ENGAGEMENT

This type of engagement may be accepted

provided:
 client takes full responsibility for the adequacy
of the procedures to be performed;
 distribution of reports is limited

LEVEL OF ASSURANCE
• no level of assurance is expressed.
 RESTRICTION
• parties who have agreed the procedures
both parties should have clear
understanding regarding the agreed
procedures and the conditions of the
engagement.

AGREED-UPON PROCEDURES (REPORT)

• Description of procedures performed and
factual findings.
ASSURANCE ENGAGEMENT is an engagement performed by a
practitioner to enable himself to express an opinion about the
measurement of subject matter against a criteria.

TYPES OF ASSURANCE ENGAGEMENT:

 REASONABLE ASSURANCE ENGAGEMENT - In these

engagements, the practitioner gathers evidence that is sufficient
and appropriate to draw reasonable conclusions. Once they do so,
they conclude that the subject matter conforms in all material
respects with identified suitable criteria. (Accounting hub-online)

 LIMITED ASSURANCE ENGAGEMENT - In these engagements,

the practitioner collects sufficient appropriate evidence to draw
limited conclusions. Unlike reasonable assurance engagements,
limited assurance engagements provide a low or material level of
assurance. Therefore, they perform fewer procedures and do not
involve substantive procedures or tests of controls. Instead, they
may use analytical procedures or make inquiries. (Accounting hub-
A particular engagement is an assurance engagement
that will depend upon whether it exhibits all the following
elements:

1. THREE PARTY RELATIONSHIP

 The Professional Accountant
 Party responsible/ Organization and ;
 The Intended Users
2. SUBJECT MATTER (the following must be appropriate)
 Data, system and Processes, Entity’s compliance, and
its physical characteristics.
3. CRITERIA
4. EVIDENCE (sufficient appropriate evidence)
5. ASSURANCE REPORT
 AUDITOR’S RESPONSIBILITY

The auditor should evaluate the completeness

and reasonableness of the underlying
assumptions as disclosed in the prospective
financial information by requiring an auditor to
obtain sufficient knowledge of the client’s
business and its process.