Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 03: As-sur-rance Eng-age-ments - Coggle Diagram
Chapter 03: As-sur-rance Eng-age-ments
Elements
3-party relationship
Intended users
Responsible users
Practitioner
Suitable subject matter
Subject matter then evaluated and assessed against suitable criteria
Practitioners must gather SUFFICIENT APPROPRIATE EVIDENCE
An assurance report provides opinion of practitioner to intended users
Types of assurance assignment
Reasonable assurance
Example: External audit
High level of assurance but not 100%
SUFFICIENT APPROPRIATE EVIDENCE is obtained
Positive wording: In our opinion, the financial statements give (or don't give) a true and fair view of the state of the company's affairs or present fairly in all material respects
Limited as-suran-ces
Example: review of financial statements
Moderate level of assurance
Focus on obvious errors only
No going concern review
Negative conclusion: Nothing has come to light to suggest errors or problems exist.
No assurance level is given
Agreed-upon procedures
Com-pi-la-tion eng-age-ment
External audit
Objective of external audit engagements: Opinion
General principles of external audit engagements
Compliance with code of ethics (IFAC's)
Performance of an audit is in accordance to ISAs
Audit with professional skepticism
Professional judgement
Sufficient appropriate evidence
Important points
Auditor do not bear responsibility for preparing and presenting financial statements. That's responsibility of directors
Statutory audit
Required by law for most companies
Small and dormant companies may be exempt
Various other body require audit under law such as building society or charity
Non-statutory audit: Owners want them, not legally required
Important terms
True - Info is factual and conforms with reality
Fair - Info is clear, impartial, and unbiased
Those charged with governance - people oversee strategic directions of companies
Management - conduct entity's operation
Engagement partner - responsible for audit engagements
Professional judgment - apply knowledge, training, and experience to make decisions
Professional skepticism - a questioning mind
Materiality: tính trọng yếu
Limitations of audit
Sampling - not practical to test 100% transactions
Subjectivity - Financial statements include judgmental areas
Limitations of internal control system
Evidence is persuasive, not conclusive
Incompleteness problems
Small frauds may go unnoticed
Other issues reduce audit usefulness
Audit report format - may be hard to understand by non-accountants
Historic information
Auditors need to be close to their clients to know how frauds are carried out, but they can't because their independence will be questioned
When auditor find fraud, their primary responsibility is report to management. Any external report is hampered by confidentiality