Question

15/5

Consider the truth or falsity of the following statements relating to audit engagements and give explanation for your decision!

a) The same standards of independence need not be applied in assurance engagements as in the statuatory audit of financial statements.

b) A review engagement results in a conclusion in the assurance report that gives limited assurance.

c) An assurance engagement need only have two parties involved - the practitioner and the responsible party.

d) If criteria is said to be complete, this means that the intended user will be able to rely on the subject matter information of the assurance report.

e) A conclusion in an assurance report that takes the form of a negative form of expression is of little value to the intended user.

Answer 1

a. False - As per the International Framework for Assurance Engagements a practitioner should accept the engagement only when the relevant ethical requirements like independence, professional competence etc are satisfied. Assurance Engagements are engagement in which a practitioner expresses a opinion/conclusion to enhance the degree of confidence of the intented users. Hence since the report of assurance engagement is for users it is imperative that the independence is upheld.

b. True - Review engagement is also called Limited Assurance because in this type of engagements auditor performs less procedure and review to support a conclusion on the financial statements in terms of whether anything has come to attention of the auditor or practitioner to indicate that the financial statements are not prepared in accordance with the specific accounting standards.

c. False - In an assurance engagement there are three parties involved. Practitioner - the person performing the assurance engagement. Responsible Party - The person responsible for subject matter or in an assertion based engagement, has responsibility for subject matter information and may be responsible for the subject matter. Intended users - The end consumer or the person or class of person for which assurance report is prepared by practitioner.

d. True - The assurance engagement are undertaken to formulate a conclusion which is designed to enhance the degree of confidence of the intended user about the outcome of the evaluation or measurement of subject matter against the criteria.

e. False - In a limited assurance engagement, the mix of nature, timing and extent of evidence gathering procedures is at least sufficient to obtain a meaningful level of assurance as the basis of Negative form of expression and the level assurance obtained by the practitioner is likely to enhance the intended users confidence about the subject matter information to a degree which is more than inconsequential.