Fundamentals of Assurance Services  The level of assurance provided by the PA’s

conclusion conveys the degree of confidence

Assurance that the intended user may place in the
 “to give confidence or conviction” credibility of the subject matter.
 Refers to the auditors satisfaction as to the
reliability of an assertion being made by one Assertion Based vs. Direct Reporting
party for use by another party.
 Auditor assesses the evidence collected as a Assertion Based
result of procedures conducted and expresses  Evaluation or measurement of subject matter
a conclusion . by the responsible party
 The degree of satisfaction achieved and the  Subject matter information in the form of an
level of assurance which may be provided assertion
depends on the procedures performed and  Available to intended users
results.  “The subject matter information is fairly stated
 Refers to the auditor’s satisfaction as to the as of date/month/year”
reliability of an assertion being made by one
party for use by another party. Direct Reporting
 Auditor assesses the evidence collected as a  Practitioner either directly performs the
result of procedures conducted and expresses evaluation or measurement of subject matter
a conclusion .  Obtains a representation from the responsible
 The degree of satisfaction achieved and the party
level of assurance which may be provided  Not available to intended users
depends on the procedures performed and  : "In our opinion the company maintained, in
results. all material respects, effective internal control
over financial reporting as of date/month/year,
Types of Services based on the criteria established in Internal
 Assurance Services Control – Integrated Framework issued by the
 Non-Assurance Services Committee of Sponsoring Organizations of the
Treadway Commission (COSO)."
Assurance Engagements
 Engagement in which a practitioner expresses Types of Assurance Engagement
a conclusion designed to enhance the degree Reasonable Assurance Engagement
of confidence that intended users can have  Aims to reduce the assurance engagement
about the evaluation or measurement of a risk to an acceptably low level .
subject matter that is a responsibility of a  Positive form of expression of practitioner’s
party, other than intended users or the conclusion.
practitioner against the criteria. Limited Assurance Engagement
 Three-party contracts in which assurers  Aims to reduce the assurance engagement at
reports on quality of information. acceptable level but greater risk than RAE.
 Negative form of expression
Example of assurance engagements
 Audit of financial statement Elements of Assurance Engagement
 Assurance on the balloting contests  A three party relationship
 Reporting on compliance with laws, rules and  An appropriate subject matter
regulation  Suitable criteria
 Sufficient appropriate evidence
Objective of an Assurance Engagement  A written assurance report in the form
 To evaluate the subject matter that is the appropriate to a reasonable assurance
responsibility of another party against engagement or limited assurance
identified suitable criteria and to express the engagement
conclusion that provides the intended user
with a level of assurance about that subject Three-party relationship
matter. Practitioner
 Assurance engagement performed by a  Person who provides the assurance intended
professional accountant is intended to users about the subject matter.
enhance the credibility of information about a  Gathers evidence to obtain assurance and
subject matter. provide conclusion to intended users about
whether a subject matter
  Practitioner Is broader term than auditor as o Subject Matter: Historical/perspective
used in PSA and PSREs financial position, performance and
 Requires specialized skills and knowledge cash flows
beyond those originally possessed by an o Subject Matter Information:
individual practitioner. Recognition, measurement,
 The practitioner may use the work of the presentation, and disclosure of the FS
persons from other discipline, referred to as
expert.  Non-financial performance or conditions
o Subject Matter: Performance of an
Responsible Party entity
 Person responsible for the subject matter or o Subject Matter Information: Key
the subject matter information in an assurance indicators of efficiency and
engagement. effectiveness
 The responsible party may or may not be the
party who engages the practitioner. ‘  Systems and processes
 Provides a written representation that o Subject Matter: An entity internal
evaluates or measure the subject matter control or IT system
against the identified criteria, whether or not it o Subject Matter Information: An
is to be made available as an assertion to the assertion about effectiveness
intended users.
 Physical Characteristics
Intended users o Subject Matter: Capacity of facility
 Person, persons or class of persons for whom o Subject Matter Information:
the practitioner prepares the assurance Specification of documents
report.
 The Responsible party can be an intended  Behavior
user but not the only one. o Subject Matter: Corporate
Parties involve in determining engagement governance, compliance with
requirements regulation, human resource practices
 Intended users / representative – involved o Subject Matter Information: A
with the practitioner and the responsible party statement of compliance or a
in determining the requirements of the statement of effectiveness
engagement
 Practitioner – determines the timing, nature Characteristics needed affect the:
and extent. 1. Precision with which the subject matter
Assurance engagement for a specific purpose can be evaluated or measured against
 Intended users impose a requirement on, or criteria
request the responsible party to arrange for, 2. The persuasiveness of available evidence.
an assurance engagement to be performed The assurance report notes characteristic
for a specific purpose. of particular relevance to the intended
 Limited users only users.

Appropriate subject matter Suitable Criteria

 Identifiable and capable of consistent  Benchmarks used to evaluate or measure the
evaluation or measurement against the subject matter.
identified criteria  Can be formal or less formal.
 Such that the information about it can be  Required for reasonably consistent evaluation
subjected to procedures for gathering or measurement of a subject matter within the
sufficient appropriate evidence to support a context of professional judgment.
reasonable assurance or limited assurance,
as an appropriate. Types of criteria
 Have a different characteristics, degree of to  Established Criteria – embodied with laws or
which information about them is qualitative regulations, or issued by authorized or
and quantitative, objective vs subjective, recognized bodies of experts that follow a
historical versus prospective , relates to a transparent due process.
point in time or covers a period.  Specifically developed criteria – designed for
Examples purpose of the engagement.
 Financial Performance or conditions  Suitable criteria
 Sufficiency and Appropriate evidence
Criteria sources:  Sufficiency – measure of quantity of evidence
 Publicly  Appropriateness – measure quality of
 Inclusion in the presentation of the subject evidence; relevance and reliability
matter information  GREATER THE RISK = MORE EVIDENCE
 Inclusion in assurance report  HIGHER THE QUALITY = LESS EVIDENCE
 By general Understanding  Obtaining more evidence will not compensate
its poor quality.
Characteristics of Suitable criteria:
 Relevance General assessment of Evidences
 Completeness  Obtained from independent sources outside
 Reliability the entity is more reliable
 Neutrality  Generated internally is more reliable when
 Understandability controls are effective
 Obtained directly by practitioner > indirectly
Sufficient Appropriate Evidence obtained or interfered
 A practitioner plans and performs an  Documentary form > Oral
engagement with an attitude of professional  Original Documents > Photocopy
skepticism to obtain sufficient and appropriate Note : Cost-benefit rule shall be observed but
evidence about whether the subject matter shall not be a valid reason to omit a procedure .
information is free of material misstatement.
 Considers materiality, assurance engagement Materiality
risk, and the quality and quantity of available  Relevant when the practitioner determines the
evidence when planning and performing the nature, timing and extent of evidence-
engagement, in determining the nature, timing gathering procedures and when assessing
and extent of evidence-gathering procedures. whether the subject matter information is free
of misstatement.
Professional Skepticism  Assessment of materiality depends on the
 Recognizes the circumstances may exist that o practitioner’s Judgement
cause the subject matter information to be o Qualitative or quantitative factors
materially misstated.
 Makes a critical assessment, with a Assurance Engagement Risk
questioning mind, of the validity of evidence  Risk that practitioner expresses an
obtained and is alert to evidence that inappropriate conclusion when the subject
contradicts or brings into question the matter information is materially misstated.
reliability of documents or representations by  Level of assurance obtained by the
the responsible party. practitioner is likely to enhance the intended
 Necessary throughout the engagement users confidence about the subject matter
process for the practitioner to reduce the risk information to a degree that is clearly more
of overlooking suspicious circumstances, of than inconsequential
over generalizing when drawing conclusions  Risk of subject matter information is materially
from observations, and of using faulty misstated which in turn consist of.
assumptions in determining nature, timing, o Inherent Risk
and extent of evidence and gathering o Control Risk
procedures and evaluating the results thereof. o Detection Risk
Professional skepticism includes: Assurance Report
 Evidence that is inconsistent with other  Written report containing the conclusion that
evidence obtained. conveys the assurance obtained about the
 Information that calls into questions the subject matter information.
reliability of documents and responses to  Can express two levels of assurance.
inquiries to be used as evidence.
 ISA, ISRE, ISAE establish basic elements for
 Circumstances that suggest the need for
assurance reports .
procedure in addition to those required by
relevant assurance standard Forms of conclusions
 Conditions that may indicate likely  Positive or negative , depending on level of
misstatement. assurance being provide.
  REASONABLE ASSURANCE – high level o Positive form of expression of
assurance practitioner’s conclusion.
 LIMITED ASSURANCE – moderate or low
level of assurance
 Limited Assurance Engagement
Positive form of assurance o Aims to reduce the assurance
 “ In our opinion, the entity has complied, in all engagement at acceptable level but
material aspects, with XYZ law.” greater risk than RAE.
 “ In our opinion, the financial statement o Negative form of expression
present fairly in all material aspects, the
financial position of the entity as at XXXX at Assurance Services
its financial performance and its cash flows for  Independent Financial Statement Audit
the year ended in accordance with XYZ  Review of Financial Statements
framework.:”  Other Review Engagements
 “In our opinion, the statement of “ XXX” that  Other Assurance Services
the entity has complied with XYZ law is, in all
material respects, fairly stated” or In our Independent FS Audit
opinion, the “Appropriate Party” statement that  Most predominant type of assurance
the key performance indicators are presented engagement
in accordance with XYZ criteria is , in all  Provides HIGH level of assurance that the
material respects, fairly stated. “ financial statements are free from material
misstatement
Limited form of assurance  Enable the auditor to express an opinion
 “ Based on the procedures performed and whether the financial statements are
evidence obtained, nothing has come to our prepared, in all material respects, in
attention that causes us to believe that the accordance with an identified financial
entity has not complied, in all material reporting framework.
respects, with XYZ law”  Obtains sufficient appropriate evidence to be
able to draw a conclusion on which to base
Assertion Based / Attestation Engagements the opinion.
 Evaluation or measurement of subject matter  Opinion enhances the credibility of the FS by
by the responsible party providing a high, but not absolute level of
 Subject matter information in the form of an assurance.
assertion  Evidence available is persuasive rather than
 Available to intended users conclusive.
 “The subject matter information is fairly stated
as of date/month/year” Review of Financial Statements (PSREs 2400 and
2410)
Direct Reporting  Limited investigation of much narrower scope
 Practitioner either directly performs the than an audit.
evaluation or measurement of subject matter  Purpose of providing limited assurance that
 Obtains a representation from the responsible the statements are presented in accordance
party with identified FRS.
 Not available to intended users  It may be historical or prospective.
 : "In our opinion the company maintained, in  Enable auditors to state whether the basis of
all material respects, effective internal control procedures which do not provide all the
over financial reporting as of date/month/year, evidence required in an audit, nothing has
based on the criteria established in Internal come to auditor’s attention that causes the
Control – Integrated Framework issued by the auditor to believe that the financial statements
Committee of Sponsoring Organizations of the are not prepared, in all material respects, in
Treadway Commission (COSO)." accordance with an identified financial
reporting framework.
Types of Assurance Engagement
 Reasonable Assurance Engagement Other Review Engagements
o Aims to reduce the assurance  Other engagement that the practitioner issue
engagement risk to an acceptably low or does issue a written communication that
level . expresses a conclusion with respect to the
 reliability of a written assertion that is the Tax Services
responsible of another party.  CPA is considered qualified to prepare
corporate and individual tax returns for both
Other Assurance services audit and non-audit clients.
 Assurance services on IT  Tax compliance and tax planning
 CPA web trust services  Tax compliance includes preparation of tax
 Information System Reliability Service returns for individuals, corporations, estates
 Assurance services on other types of and trusts and others.
assurance  Tax planning determines tax consequences of
o Business Performance Measurement planned or potential transaction and suggest
Services’ the desirable course of action to minimize the
o Health Care Performance tax liability while achieving the client’s
Measurement objectives.
o Risk Assessment
o Eldercare Plus Management Consulting/ Advisory Services
 Annual Environmental Audit  Professional services that employ’s
 Assessment on risks of accumulation, practitioner technical skills, education,
distribution and storage of digital information observations, experiences, practices, and
 Compliance with trading policies procedure knowledge of analytical approach and
procedures used in consulting engagement.
 Compliance with entertainment royalties
agreement  Determines clients objectives, fact-finding,
definition of problems or opportunities,
 Controls over and risks related to
evaluation of alternatives, formulation of
investments , including policies related to
proposed action, etc.
derivatives
 Fraud and Illegal acts risk assessment
 Mystery Shopping Accounting and Data Processing or Information
 ISO 9000 certification Technology System Services
 Doing manual or automated bookkeeping,
Non-assurance Engagements journalizing and posting journal entries or
 Agreed-upon procedures preparing financial statements.
 Compilation of financial and other information
 Preparation of tax returns ( no conclusion is Reports on Non-assurance Engagement
expressed and tax consulting)  Engagement must be clearly distinguished to
 Management consulting Non-assurance Engagement
 Other Advisory Services  Implying compliance to PSA, PSRE’s or
PSAEs
Agreed Upon procedures  Inappropriately using the words, “assurance”,
 Party engaging the professional accountant or “audit” or “review”
the intended user determines the procedures  Including a statement that could reasonably
to be performed and the professional be mistaken for a conclusion designed to
accountant provides a report of factual enhance the degree of confidence of intended
findings as a result of undertaking those users about the outcome of the evaluation or
procedures. measurement of a subject matter against
 Governed by Standard on Assurance criteria.
Engagement  Assurance engagement  non-assurance
engagement or form RAELAE is not allowed
Compilation Services without justification.
 Presenting in the form of financial statements
that Is the representation of management
without undertaking to express any assurance
on the statements.
 CPA uses accounting expertise to collect,
classify and summarize financial information .
 Improves quality of information by displaying
FAR standards format and the practitioners
identification of obvious errors.