Chap - 1 (contept of and need for

Assurnace)

Khadija Yeasmien,FCA
Topics to be discussed -

1. Definition of Assurance
2. Importance of Assurance
3. Assurnce can never be absolute
4. statutory Audt

Khadija Yeasmien,FCA
Assurnance

An assurnace engagement is one in which-

- a practititioner expresses a conclusion ( written audit report)

- designed to enhance the degree of confidence of the intended
users ( shareholders, BoD, owners of the business etc)
- other than the responsible party about the outcome of the
evaluation/measurement of a subject matter ( FS)
- against the criteria (Law and accounting standards)

Khadija Yeasmien,FCA
 Key elements of Assurance Engagement:
1.Three people/group of people:
i. The Accountant/Practitioner
ii. The intendend users
iii. The responsible party( who prepare the subject matter/accounts)
2. A subject matter
i.Data (FS,Business Projection)
ii.System/Process ( internal control system/computer system)
iii. Behaviour(social and environment performance,Corporate Governance)
3. Suitable Criteria
Accounting Standards (IFRS) for FS preparation. other applicable Laws and
Rules etc.
4.Sufficient appropriate evidence (to support the conclusion/opinion/report) - we must
obtain evidence as to whether the criteria have been met.
5. A written report in appropriate form
Assurance report provided to the intendent user in a written form, contained
certain specific information.
Khadija Yeasmien,FCA
 Level of assurance:

IFAC (International Federation of Acountnant) issued International

Framework for Assurnace Engagement.
Two types of Assurance Egangement:
i. Reasonable assurance (unqualified opinion)
- a high level of assurance but less than the absolute assurnace
- risk has been reduced to an acceptable low level
- possitive.
ii. Limited assurance (qualified/adverse/ disclaimer of opinion)
- inconsequential but less than reasonable assurance
- to an acceptable leve
- negative.

Khadija Yeasmien,FCA
• Example:

‘ in my opinion, the statement given by the Chairman regarding X is

reasonable.
- a possitive statement

‘in the course of my seeking evidenace about the statement given

by the Chairman,nothing has come to my attention indicating that
the statement is not reasonable’
- nagative assurance.

Khadija Yeasmien,FCA
Example of Asssurance Engagements

- Staturoty audit ( most common and well known)

- pension scheme audits
- Environmental audit
- valuation service
- internal control reports
- Fraud investigation
- internal audit
- Report on business plans/projections
- Inventories receeivables reports

Khadija Yeasmien,FCA
Importance/Benefits of Assurance ( to users):

- independent and prfeossional verification given to the users.

- Enhanc confidence to the stakeholders
- Enhacne the credibility of the financial informtion
- Help to prevent the errors/fraud and reduce management
biasness.

Khadija Yeasmien,FCA
 Limitations of assurance:

- Testing
- inharent limitations ( provsion/ estimate etc)
- evidence is persuasive rather than conclusive ( purpose served,
it is not concludion).
- sampling approach (not tested every items of subject matter)
- subjective and professional judgement have to be made
- items in the subject matter may be estimates and are
therefor uncertain
- nature of the assurance report might itself be limiting (as per
701)
so it is impossible to provide absolute assurance.

Khadija Yeasmien,FCA
 Statutory Audit

A legal requirment that all companies over a certain size have an audit.
most common forms of assurance engagement in BD

Objective
The objective of an audit of FS is to enable the auditor to express an
opinion whether the FSs are prepared, in all material respects, in
accordance with an applicable financial reporting framework.

Khadija Yeasmien,FCA
 True and Fair

True: Information is factual and conforms with reality, not false. which
comforms with required standards and law. The accounts have been
correctly extracted from books and records ( J - L- TB - FSs)

Fair: Information is free from discrimination and bias in compliance

with expected standards and rules. The accounts should reflect the
commercial substance of the company`s underlying transactions.
( behind the jounal all the attahed documents are found ok).

Like - Purchase ( requisition,tender/ quatation,order and payment)

Khadija Yeasmien,FCA
 Audit Stages:

1. Obtaining engagement (EOI/tender, appointment than EM letter)

2. Planning ( who, what, how the audit to be done etc, scop, timing & direction)

3. Performing procedure ( perform the audit, sufficient, appropriated audit evident)

4. Review and Completion (workd done in the audit firm)

5. Reporting ( written report as per 701)

Khadija Yeasmien,FCA
 Professional scepticism

An attitude that includes a qustioning mind, being alert to conditions which

may indicate possible misstatement due to error or fraud and a critical
assessment of audit evidence

Professional judgement

The application of relevent training,knowledge and experiance in making

informed decession about the courses of action that are appropriate in the
circumstances of the audit engagement.

(knowledge,experiance & expertise grown, using this partner/direcor can

guide about who, what how etc.)

Khadija Yeasmien,FCA
Professional scepticism requres the auditor to be alert to:

- Audit evidence that contradicts other audit evidence obtained

- information that brings into question the reliability of documents and
responses to inquiries to be used as audit evidence
- conditions that may indicate possible fraud
- circumstances that suggest the need for audit precedures in addition
to those requied by ISAs
It needs to maintain through out the audit to reduce the risk

Khadija Yeasmien,FCA
ISA 200 required to exercise Professional judgement in planning and
performeing an audit of FS. it is required in the following areas-

- Mareriality and audit risk

- Nature time and extent of audit procedures
- Evaluation of whether sufficient appropriate audit evidence has been
obtained
- Evaluating managment judgments in applying the applicable financial
reporting framework
- Drawing conclusions based on the audit evidence obtained.

Khadija Yeasmien,FCA
Legal and professional requirements( qulification of Auditor):
Goverment of Bangaldesh

Ministry of Commerce

Autonomous Regolatory Body(ARB) ie ICAB

Member ( practitioner) of ICAB ( as per Companies Act 1994)

can be auditor.

Khadija Yeasmien,FCA
A person is ineligible for being a compay auditor as per Companies Act
1994 ( U/S - 212) if s/he is
- an officer/employee of the company (conflict of interest)
- a partner/empolyee of such a person
(partner/director somehow linked with the co,manager,J.auditor who
can not be indepandent,can significantly influence the audit result)
- a person who is indebted to the company exceeding TK.1000 (loan
taken from bank)
- a person who is director or member of a private company, or
a partner of a firm, which is the managing agent of the company
( independent director of the company).
- a person who is a director or holder of shares exceeding 5% of the
subscribed capital.
Note: Appointment/removal,qualifiation/disqualification, power and duties,
branch audit,right to attend in the AGM etc of auditor mentioned in the
sections 211-217 of Companies Act 1994.
Khadija Yeasmien,FCA
International Fedaration of Accountant (IFAC)

International Audit and Assurance Standard

Board (IAASB)

International Standard on Auditing ( ISAs)

Khadija Yeasmien,FCA
 IFRS Foundation

1. International Accounting Standard Board

(IASB)- standard - setting body
2. IFR Interpretation Committee ( IFRIC)

1. IFRS - 17, IAS - 25

2. 15 IFRIC interpretations.
Khadija Yeasmien,FCA
Thanks a lot

Khadija Yeasmien,FCA