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Assurance - Chapter 1: Concept of and need for assurance - Coggle Diagram
Assurance - Chapter 1:
Concept of and need for assurance
What is assurance?
Definition:an assurance is one in which a practitioner expresses a conclusion designed to enhance the degree of confidence of the users other than the responsible party about the outcome of the evaluation or measurement of a subject matter against criteria.
5 key elements
Three party relationships:
The practitioner (chuyen gia tu van - accountant)
The intended users (nguoi su dung dich vu assurance)
The responsible party (ben thu 3 lien quan - cung cap info)
A subject matter in 3 categories:
Data (FS or business projection)
Systems or processes (internal control, computer systems)
Behaviour ( social and environmental performance...)
Suitable criteria - cac tieu chuan danh gia cua assurance
Sufficient and appropriate evidence - cac bang chung day du va hop ly
A written report
Level of assurance: 3 levels
Absolute - never reach this level
Reasonable assurance engagement - high level of assurance - positive wording
Limited assurance engagement - moderate level of assurance - negative wording
Examples of assurance
Assurance engagements:
Local authority audits
Insurance company audits
Charity audits
Solicitors' audit
Branch audit
Issues for assurance:
Value of money
Metrics relating to environmental
Internal audit
Cost/benefits reports
Due diligence
Inventories and receivables reports
Importance of assurance
Users
Benefits of assurance: key - independent, professional verification given to users:
Give confidence to other parties in the way that benefits the business
Help prevent errors and farauds being made and reduce the risk of management bias
Better prepared subject matter
Draw attention to the deficiences in that information
Ensure high qualiy and reliable information risk
Grow public perception that is an important area
Reasons for assurance never be absolute
Limitations off assurance services:
Not oversee the whole process from start to finish
Inherent limitations in accounting systems
Most evidence is persuative and conclusive
Sampling approach is used
Collusion from client and staff member
Subjective and professional judgements
Provider rely on the responsible paty for information
Subject matter may be estimated and uncertain
Expectation gap:
Users not aware of the nature of limitations on assurace provison
Misunderstanding by users
The statutory audit
Statutory audit
Audit off FS: enable the auditor to express an opinion whether FS are prepared with a MATERIAL RESPECTSS with FR Framework
Key outcome: the audit opinion by the reference to the true and fair view
True: factual and conforms with reality, not els
Fair: free from discrimination and bias from compliance with expected standard and rule
Audit exemption in UK: small companies which
Turnover not more than 10.2m
Total assetss not more than 5.1m
Number of employees: not more than 50
Legal and professional requirements:
Accountant (team) eligible for appointment:
individual holding an appropriate qualification
Firm controled by qualified persons
Introduction to Sustainability