Reasonable assurance: is the high but not absolute level of assurance, depends on evidence obtaining during the time of audit. Importance and benefits of assurance: • • • • • • Independent professional opinion Confidence Prevention of error and fraud Acceptance Recognition/reliability Credibility
True: that id factual, confirmation and reality Fair: free from discrimination and bias Assurance never be absolute: assurance provider never obtain the absolute level of assurance due some limitations. So assurance never be absolute. Limitations of assurance engagement: • • • • • • Over see the preparation of F.S. Inherent limitation Evidence obtain Test basis checking Estimates Nature of assurance report
Tarek 01712-049032 • • Short time Shortage of man power
Assurance engagement process: • • • • • • • • • • Obtaining the engagement Continuous risk assessment Engagement acceptance Scope of the engagement Planning the engagement Obtaining evidence Evaluation the result of assurance work Concluding and reporting on the engagement Reporting to the engagement parties Keeping record
Audit: the objective of an audit of F.S. is to enable the auditor to express an opinion whether the F.S. are prepared, in all material respects, in accordance with an applicable financial reporting framework. There are many issues users want assurance on: * Value for money studies • Circulation report • Cost/benefit report • Due diligence • Review of specialist business activities • Internal audit • Report on website security • Fraud investigations • Inventories and receivables report • Internal control report • Reports on business plans or projections Examples of assurance engagement • • • • • • • • Local authority audit Bank audit Insurance audit Pension scheme audit Charity audit Solicitors audit Environmental audit Branch audit
Expectation gap: difference between expectation level and practical audit performance.
Tarek 01712-049032 Company Act: 1994 Chapter: 2 (Process of Assurance)
Scope/step/process of assurance engagement: • • • • • Source of information of new client Enquiries from other source Document review Previous auditor Review rules, regulation and standards
Assurance engagement letter: 1. Starting: • • Flow of communication auditor Vs client Address- To responsible parties/client
2. Body: • • • • Introduction/reference Management and auditors responsibility to F.S. Scope of audit work-test limitation Other responsibilities
3. Conclusion: • • Audit fees and other charges Conclusion Para (depend on nature of business)
Audit accepting an engagement: • • • • Proposed auditor must communicate with previous auditor (on the permission of client). If their audit engagement date is valid Refusal reasonable cause If any fraud/error in the client
Assurance appointment considerations: • • • • Ensure professionally qualified Ensure existing resources are adequate Obtain reference Communicate with previous auditor.
Tarek 01712-049032 ** Read interactive questions and self test from manual.
Chapter: 3 (Planning and Assignment)
Planning: is a process by which assignment will be performed in an effective manner. Audit plan: is a process by which auditor will perform all activities regarding audit in an effective manner. Audit strategy: is a technique which sets scope, timing and...