Introduction to Assurance

Services and Engagements

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Supplemental Readings:
o Philippine Framework for Assurance Engagements (PFAE)
o PSAE 300 (Revised) – Assurance Engagements other than
Audits or Reviews of Historical Financial Information
o PSA Glossary of Terms

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Assurance Services

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 Definition of Terms

Assurance Services
Assurance Services are independent
“

professional services that improve the quality

of the information or its context, for decision
makers”
- American Institute of Certified Public Accountants (AICPA Special
Committee on Assurance Services

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Assurance Engagement

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 Definition of Terms

What is assurance?
“..means an engagement 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 outcome of the evaluation
or measurement of a subject matter
against criteria.”
- Philippine Framework for Assurance
Engagements

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Levels of assurance

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 Definition of Terms

What are levels of assurance?

1.Absolute Assurance
2.Reasonable assurance
3.Limited assurance

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 Definition of Terms

What is reasonable assurance?

The practitioner needs to reduce the

assurance engagement risk to an acceptably
low level in the circumstances of the
engagement as the basis for a positive form of
expression of the practitioner’s conclusion.

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 Definition of Terms

What is limited assurance?

The practitioner needs to reduce the

assurance engagement risk to a level that is
acceptable in the circumstances of the
engagement, but where that risk is greater
than for a reasonable assurance, as the basis
for a negative form of expression of the
practitioner’s conclusion.

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 Reasonable versus Limited

Objective Evidence- Assurance

gathering report
procedures
Reasonable Risk to an Obtaining the Positive form of
assurance acceptable low understanding of expression of the
level the engagement conclusion
Assessing risks
Responding to “… in our opinion,
risk the internal
Performing audit control is
procedures effective, in all
Evaluating material respects,
evidence based on XYZ
obtained criteria.”

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 Reasonable versus Limited
Objective Evidence- Assurance report
gathering
procedures
Limited assurance Risk to a level that Deliberately limited Negative form of
is acceptable, such as expression of the
where the risk is obtaining the conclusion
greater than for a understanding of
reasonable the subject matter “ Based on our
assurance work described in
this report, nothing
has come to our
attention that
causes us to
believe that
internal control is
not effective, in all
material respects,
based on XYZ
criteria.”

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 Definition of Terms

What is assertion-based engagement?

The responsible party carries out the measurement

or evaluation of the subject matter and reports the
information which contains the responsible party’s
assertion. The work the practitioner performs is to
give an assurance conclusion on this assertion.

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 Definition of Terms

What is direct reporting engagement?

The responsible party does not present the subject
matter information in a report. Instead, the practitioner
performs the evaluation or measurement of the subject
matter information without any assertion by the
responsible party, or obtains representation from the
responsible party that it has performed the valuation or
measurement but the information is not available to the
intended users.

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 Assertion-based versus direct reporting

Assertion-based
The auditor issues an opinion on written assertions made by
others.

Direct reporting
The auditor provides assurance on an accountability matter
on which the responsibility party has not made a written
assertion.

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Questions

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