In this chapter, the learning objectives are Know the definition of assurance services, be familiar with the types of assurance services offered by cpas, know the definition of an attestation engagement, know the types of attestation engagements.
Chapter Twenty Assurance, Related Services and Internal Auditing © The McGraw-Hill Companies 2010 Elliott Committee: Assurance Services Assurance services are independent professional services that improve the quality of information, or its context, for decision-makers © The McGraw-Hill Companies 2010 Decision-Making and the Role of Information © The McGraw-Hill Companies 2010 Assurance Services and IAASB Engagement Standards © The McGraw-Hill Companies 2010 IAASB: Assurance Engagements An engagement in which a practitioner expresses 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 © The McGraw-Hill Companies 2010 IAASB: Assurance Engagements • Subject matter and subject matter information • Criteria • Practitioner • Intended user • Responsible party • Assertion-based engagements • Direct reporting engagements © The McGraw-Hill Companies 2010 IAASB: Assurance Engagements • • • • • Ethical requirements Appropriate subject matter Suitable criteria Sufficient appropriate evidence Practitioner’s conclusion in a written report • Reasonable or limited assurance • Conclusion in positive or negative form • Rational purpose Assurance engagement risk is the risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated © The McGraw-Hill Companies 2010 IAASB Assurance Standards and Assurance Level • Reasonable assurance means that the engagement assurance risk is reduced to an acceptably low level in the circumstances of the engagement • In a limited assurance engagement the risk is greater than for a reasonable assurance engagement, but still acceptable in the circumstances of the engagement The nature, timing and extent of procedures for gathering sufficient appropriate evidence in a limited assurance engagement are deliberately limited relative to a reasonable assurance engagement © The McGraw-Hill Companies 2010 IAASB Assurance Standards and Assurance Level © The McGraw-Hill Companies 2010 Review of Historical Financial Information • Review as an alternative to an audit • Review performed by the auditor of the entity, for example review of interim financial information • Historical financial information • Inquiries and analytical procedures • Limited assurance • Negative form of expression of the conclusion Negative form of expression of the conclusion The review provides a basis to express a conclusion whether anything has come to the practitioner’s attention that causes the practitioner to believe that the financial information is not in accordance with the applicable financial reporting framework © The McGraw-Hill Companies 2010 Overview of Global Reporting Initiative (GRI) G3 Guidelines © The McGraw-Hill Companies 2010 Assurance on Sustainability Reporting What type of information does sustainability reporting typically include? Why is third-party assurance of sustainability reporting demanded? Why companies report on sustainability? What is relevant guidance for assurance on sustainability reporting? What are relevant criteria for reporting on sustainability? What is the role of practitioners as assurers of sustainability reporting? © The McGraw-Hill Companies 2010 Assurance on Prospective Financial Information Financial forecasts are prospective financial information based on expectations of future events and actions General use © The McGraw-Hill Companies 2010 Financial projections are prospective financial information based on hypothetical assumptions about future events and actions Limited use Assurance on Prospective Financial Information (1) Evaluating the preparation (3) Evaluating the presentation (2) Evaluating the support of the underlying assumptions (4) Issuing an assurance report © The McGraw-Hill Companies 2010 Related Services Related Services ISRS 4400 Provide No Assurance Agreed-Upon Procedures Compilati on © The McGraw-Hill Companies 2010 ISRS 4410 Agreed-Upon Procedures Report © The McGraw-Hill Companies 2010 Agreed-Upon Procedures Report (cont.) © The McGraw-Hill Companies 2010 Compilation Report © The McGraw-Hill Companies 2010 Internal Auditing Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes © The McGraw-Hill Companies 2010 Institute of Internal Auditors (IIA) Standards The IIA oversees and sets standards for internal auditing internationally Mandatory guidance •Definition of internal auditing •Code of ethics •Standards © The McGraw-Hill Companies 2010 Strongly recommended guidance •Position papers •Practice advisories •Practice guides IIA Code of Ethics Principles Integrity Competency Objectivity Confidentiality © The McGraw-Hill Companies 2010 Internal Auditors’ Roles Evaluating Risks and Controls Reviewing Compliance Financial Auditing Operational Auditing © The McGraw-Hill Companies 2010 Internal Audit Function © The McGraw-Hill Companies 2010 Interactions between Internal and External Auditors Some of the work performed by internal auditors may be directly relevant to the work of the external auditor © The McGraw-Hill Companies 2010 Before a decision to use some of the work of internal auditors, the external auditor must evaluate the internal auditors’ objectivity and competence End of Chapter 20 © The McGraw-Hill Companies 2010 ... Companies 201 0 Decision-Making and the Role of Information © The McGraw-Hill Companies 201 0 Assurance Services and IAASB Engagement Standards © The McGraw-Hill Companies 201 0 IAASB: Assurance Engagements... Issuing an assurance report © The McGraw-Hill Companies 201 0 Related Services Related Services ISRS 4400 Provide No Assurance Agreed-Upon Procedures Compilati on © The McGraw-Hill Companies 201 0 ISRS... McGraw-Hill Companies 201 0 Assurance Report Compliance with the Kimberley Process © The McGraw-Hill Companies 201 0 Assurance Report on Internal Control © The McGraw-Hill Companies 201 0 IAASB Assurance