Auditing and Financial Report
Solutions Manual
to accompany
Auditing: a practical approach
by
Jane Hamilton
CHAPTER 1
Introduction and overview of auditing
[pic]
John Wiley & Sons Australia, Ltd 2010
Chapter 1 – Introduction and overview of auditing
1. What does ‘assurance’ mean in the financial reporting context? Who are the three parties relevant to an assurance engagement?
An assurance engagement (or service) is defined as ‘an engagement in which an assurance 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’ (Framework for Assurance Engagements, para. 8; International Framework for Assurance Engagements, para. 7).
In the financial reporting context ‘assurance’ relates to the audit or review of an entity’s financial report.
An audit provides reasonable assurance about the true and fair nature of the financial reports, and a review provides limited assurance. The audit contains a positive expression of opinion (e.g. ‘in our opinion the financial reports are in accordance with (the Act) including giving a true and fair view…), while the review contains a negative expression of opinion (e.g., ‘we have not become aware of any matter that makes us believe that…the financial reports are not in accordance with (the Act)... including giving a true and fair view..’).
An auditor may also perform agreed upon procedures for a client, but these do not provide any assurance. The client determines the nature, timing and extent of procedures and no opinion is provided to a third-party user.
The assurance practitioner is an auditor working in public practice providing assurance on financial reports of publicly listed companies, or other entities. Intended users are the people for whom the assurance provider prepares their report (e.g. the shareholders). The responsible party
to accompany
Auditing: a practical approach
by
Jane Hamilton
CHAPTER 1
Introduction and overview of auditing
[pic]
John Wiley & Sons Australia, Ltd 2010
Chapter 1 – Introduction and overview of auditing
1. What does ‘assurance’ mean in the financial reporting context? Who are the three parties relevant to an assurance engagement?
An assurance engagement (or service) is defined as ‘an engagement in which an assurance 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’ (Framework for Assurance Engagements, para. 8; International Framework for Assurance Engagements, para. 7).
In the financial reporting context ‘assurance’ relates to the audit or review of an entity’s financial report.
An audit provides reasonable assurance about the true and fair nature of the financial reports, and a review provides limited assurance. The audit contains a positive expression of opinion (e.g. ‘in our opinion the financial reports are in accordance with (the Act) including giving a true and fair view…), while the review contains a negative expression of opinion (e.g., ‘we have not become aware of any matter that makes us believe that…the financial reports are not in accordance with (the Act)... including giving a true and fair view..’).
An auditor may also perform agreed upon procedures for a client, but these do not provide any assurance. The client determines the nature, timing and extent of procedures and no opinion is provided to a third-party user.
The assurance practitioner is an auditor working in public practice providing assurance on financial reports of publicly listed companies, or other entities. Intended users are the people for whom the assurance provider prepares their report (e.g. the shareholders). The responsible party