Auditing and Assurance

Services
 Assurance Service Elements

Assurance services are (1) independent (2)

professional services that (3) improve
the quality of information, or its
context, (4) for decision makers.
Assurance services include many areas of
information, including nonfinancial areas.
 Assurance Service Elements
(TASSA)

A three party relationship.

An Appropriate subject matter.
Suitable Criteria
Sufficient Appropriate Audit Evidence
A written assurance report.
 A. Three Party Relationship

1. An independent and competent professional

accountant who adheres to the fundamental
principles required by the Code of Ethics.
2. The party responsible for the subject
matter of the assurance engagement.
3. The intended users to whom the
professional accountant usually addresses the
report.
 B. Subject Matter

Forms of Subject Matter

•Data
•Systems and processes
•Behavior
•Physical characteristics
 C. Criterias

• These are the standards or benchmarks

used to evaluate or measure the subject
matter of an assurance engagement.
 D. Evidence

•  Anything presented in support of an

assertion.
 E. Assurance Report

• The professional accountant expresses a

conclusion that provides a level of
assurance as to whether the subject
matter conforms in all material respects
with identifiable suitable criteria.
 E. Assurance Report
• NON-ASSURANCE ENGAGEMENTS
1. Agreed-upon Procedures
2. Compilation of Financial Statements
3. Preparation of Tax returns when no
conclusion is expressed, and tax
consulting;
4. Management Consulting
5. Other Advisory Services
RELATED SERVICES (ARCA)
• Four types of Services in connection
with Financial Statements:
1)Audit
2)Review
3)Compilation
4)Agreed-Upon Procedures
 REVIEW ENGAGEMENT
 CPA expresses limited assurance that the financial
statements are in accordance with GAAP or another
comprehensive basis of accounting.
 CPA must be independent to perform a review.
 Suggested procedures include:
 Obtain knowledge of the accounting principles and
practices of the client’s industry.
 Obtain knowledge of the client
 Make inquiries of management
 Perform analytical procedures
 Obtain letter of representation
 Each page should state “See Accountant’s Review Report.”
 REVIEW ENGAGEMENT
 Reporting Responsibility
- Review report should contain a clear written
expression of negative assurance.
 REVIEW ENGAGEMENT
REVIEW ENGAGEMENT REPORT

To (person engaging the public accountant)

I have reviewed the balance sheet of Client Limited as at ......, 20... and the statements of income,
retained earnings and cash flows for the year then ended. My review was made in accordance with
Canadian generally accepted standards for review engagements and accordingly consisted primarily of
enquiry, analytical procedures and discussion related to information supplied to me by the company.

A review does not constitute an audit and consequently I do not express an audit opinion on these
financial statements.

Based on my review, nothing has come to my attention that causes me to believe that these financial
statements are not, in all material respects, in accordance with Philippine generally accepted
accounting principles.

City (signed).............................................
Date ACCOUNTANT
 REVIEW ENGAGEMENT
 Unqualified Review Report
- There are no material modifications that should
be made to the FS in order for the FS to be in
conformity with PFRS.

 Modifications of the Review Report

a. Departure from PFRS
- Express a “qualification of the negative
assurance” or,
- If the effect is material and pervasive to the FS,
make an “adverse statement” that FS are not
presented fairly, in accordance with PFRS.
 REVIEW ENGAGEMENT
 Modifications of the Review Report
b. Scope Limitation
- Express a “qualification of the negative
assurance” or,
- If the effect is material and pervasive to the FS,
no level of assurance can be provided, auditor
should “not provide any assurance”.
 COMPILATION
ENGAGEMENT
 CPA prepares financial statements but does not express
any assurance on them.
 The objective is for the accountant to use accounting
expertise.
 It would ordinarily include the preparation of FS (which
may or may not be a complete set of FS) but may also
include collection, classification and summarization of
other financial info.
 When the CPA expects that a third-party will use the
financial statements, a compilation report must be
prepared.
 Procedures to be performed should read the compiled
info. And consider whether it appears to be appropriated
in form and free from obvious material misstatements.
 Each page should state “See Accountant’s Compilation
Report.”
 COMPILATION
ENGAGEMENT
 Modifications of the Compilation Report
a. Departure from PFRS
- If material departure from PFRS, “disclose” the
departure in a separate paragraph of the report,
also effects do not have to be quantified.
- If the modification of report is not sufficient to
describe the PFRS departures and client is not
willing to correct statements, “withdraw from
engagement”.
 COMPILATION
ENGAGEMENT
 Modifications of the Review Report
b. Scope Limitation
- Normally cause to “withdraw from
engagement”.
COMPILATION
ENGAGEMENT
 AGREED-UPON PROCEDURES
 The primary appeal to practitioners of agreed-
upon procedures engagements is making
management or a third-party user specify the
procedures they want performed.
a)The client takes full responsibility for the
adequacy of the procedures to be performed;
b)The distribution of the report is limited only to
those parties who have agreed about the
procedures to be performed.
 AGREED-UPON PROCEDURES
• Consists of performing procedures normally
associated with an audit or special engagement
– Inventory observation
– Confirmation of receivables
– Summarize customer comment cards
• Scope less than in an audit (responsibility of user)
• Accountant reports procedures and findings
– No opinion at all
• Must restrict distribution of report to users who
established scope of engagement
 AGREED-UPON PROCEDURES
Terms of Engagement
- There is a clear understanding regarding
the agreed procedures and the conditions
of the engagement.
 Reporting Responsibility
- Describe the purpose and the agreed upon
procedures of the engagement is sufficient
detail to enable reader to understand the
nature and the extent of work performed.
COMPARISONS
END