- •Explain the five elements of an assurance engagement
- •Describe the types of assurance engagement
- •Briefly describe what internal auditing is
- •Outline the stages of an audit
- •Define professional scepticism
- •Describe the limitations of external audits
- •Explain the relationship between International Standards on Auditing and national standards
- •Analyse the structure and roles of audit committees and discuss their benefits and limitations.
- •Define and apply the fundamental principles of professional ethics of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.
- •Define and apply the conceptual framework, including the threats to the fundamental principles of self-interest, self-review, advocacy, familiarity and intimidation (многовато текста)
- •Discuss the safeguards to offset the threats to the fundamental principles
- •1. Self – interest threat
- •2. Self – review threat
- •Provision of non – audit services in general
- •Preparing accounting records and financial statements
- •Valuation services
- •Describe the auditor's responsibility with regard to auditor independence, conflicts of interest and confidentiality
- •Justify the importance of engagement letters and their contents
- •Explain the need for, and the importance of, audit documentation.
- •Describe the form and contents of working papers and supporting documentation.
- •Importance of working papers
- •Describe and explain the five components of internal control
- •Discuss the limitations of internal control components
- •Explain how auditors record internal control systems including the use of, narrative notes, flowcharts, internal control questionnaires and internal control evaluation questionnaires
- •Internal control questionnaires and internal control evaluation questionnaires
- •Define and explain the concepts of materiality and performance materiality
- •Define audit sampling and explain the need for sampling
Explain the five elements of an assurance engagement
An assurance engagement is one 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 subject matter information (that is, the outcome of the evaluation or measurement of a subject matter against criteria).
Elements of an assurance engagement
An assurance engagement performed by a practitioner will consist of the following elements:
A three party relationship. The three parties are the intended user, the responsible party and the practitioner.
Intended users are the person, persons or class of persons for whom the practitioner prepares the assurance report.
The responsible party is the person (or persons) responsible for the subject matter (in a direct reporting engagement) or subject matter information of the assurance engagement.
The practitioner is the individual providing professional services that will review the subject matter and provide the assurance.
A subject matter. This is the data to be evaluated that has been prepared by the responsible party. It can take many forms including financial performance (eg historical financial information), non-financial performance (eg key performance indicators), processes (eg internal control) and behaviour (eg compliance with laws and regulations).
Suitable criteria. The subject matter is evaluated or measured against criteria in order to reach an opinion.
Evidence. Sufficient appropriate evidence needs to be gathered to support the required level of assurance.
An assurance report. A written report containing the practitioner's opinion is issued to the intended user, in the form appropriate to a reasonable assurance engagement or a limited assurance engagement.
Describe the types of assurance engagement
There are two types of assurance engagements: attestation engagements and direct engagements. The main difference between the two lies in who is measuring, or evaluating, the underlying subject matter against the criteria.
(a) An attestation engagement: This is where the underlying subject matter has not been measured or evaluated by the practitioner, and the practitioner concludes whether or not the subject matter information is free from material misstatement.
A good example of an attestation engagement is the review of a sustainability report, which has been prepared by management. In this case, management measures and evaluates the extent to which the company has achieved its sustainability targets, and the practitioner provides a conclusion as to whether the measurement and evaluation is free from material misstatement.
(b) A direct engagement: This is where the underlying subject matter has been measured and evaluated by the practitioner, and the practitioner then presents conclusions on the reported outcome in the assurance report.
An example of this is when the practitioner is engaged to carry out a review of the effectiveness of a company’s system of internal controls. The practitioner would evaluate the internal controls, and then issue an assurance report explaining the outcome of the review.