This document discusses assurance engagements other than audits of general purpose financial reports. It defines assurance engagements and outlines their key elements. It describes different types of assurance engagements including those involving historical financial information, compliance, performance and sustainability. Examples of other assurance engagements discussed are forensic auditing and continuous auditing. The document also covers quality standards for assurance practitioners including ISO standards and total quality management.

1. Chapter 4
Other Assurance
Engagements and
Quality Standards
Prepared by Dr. Phil Saj
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2. Learning objectives
1. Appreciate the framework on assurance
engagements other than those relating to
general-purpose financial report audits.
2. Discuss assurance engagements for historical
financial information other than those relating to
general-purpose financial report audits.
3. Discuss the features and extent of other
assurance engagements.
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3. Learning objectives (continued)
4. Use examples to illustrate the scope of
assurance engagements other than those
relating to historical financial information.
5. Appreciate some of the professional quality
standards applicable to assurance
engagements.
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4. Assurance Engagements Standards
The Framework for Assurance Engagements (issued by
the AASB) states that an assurance engagement is:
“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.”
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5. Assurance engagement
Elements of an assurance engagement
Three party relationship;
Subject matter;
Suitable criteria;
Evidence gathering; and
Written assurance report
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6. Subject
Matter
Intended
User
Evidence gathering
Suitable Criteria
Written
Assurance
Report
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Assurance engagement
Responsible
Party
Assurance provider
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7. Assurance engagements
APES110 Code of Ethics for Professional
Accountants formulates the fundamental ethical
principles for accountants. These are:
integrity;
objectivity;
professional competence and due care;
confidentiality; and
professional behaviour and technical
standards.
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8. Categories of assurance
engagements
Assertion-based engagements
The assurance practitioner provides an
opinion on an assertion made about the
subject matter.
Direct reporting engagements
The assurance practitioner expresses
an opinion on subject matter itself
absent of any subject matter information.
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9. Categories of assurance
engagements
Reasonable assurance engagements aim at
reducing risk to an acceptably low level as a basis
for a positive conclusion (reasonable assurance
means a high but not absolute level of assurance).
Limited assurance engagements aim at
reducing risk to a level that is acceptable in the
circumstances but where that risk is greater than
for a reasonable assurance engagement as the
basis for a negative conclusion.
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10. Assurance engagements
Historical financial information engagements
Three main areas:
Audits of general-purpose financial
reports.
Other audits of historical financial
information.
Reviews of financial reports and
other historical information.
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11. Assurance engagements
Engagements other than those related to
historical information
Compliance engagements
Performance engagements
Sustainability engagements
Forensic auditing engagements
Continuous audit
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12. Assurance engagements involving
historical financial Information
Audits of special-purpose financial reports:
Prepared by a non-reporting entity.
Typically prepared for a particular purpose.
Examples include:
Meeting the provisions of a contract;
Complying with the tax basis of accounting
A not-for-profit entity meeting the
requirements of a State incorporations act.
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13. Assurance engagements involving
historical financial Information
Special-purpose financial reports
Prepared by a non-reporting entity
Typically prepared for a particular purpose.
Examples include:
Financial reports are prepared in accordance
with the provisions of a contract;
Financial reports are prepared in accordance
with the tax basis of accounting.
The auditors must understand the purpose for
which the financial information is prepared and
consult with the governing bodies if necessary.
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14. Assurance engagements involving
financial information
Audits of single financial statements and
specific elements, accounts or items.
Normal auditing standards apply.
Important considerations:
Subject matter is limited; and
May have a limited understanding of
the organisation
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15. Assurance engagements involving
financial information
Audits of summary financial statements
Auditor should not report on summary
information unless an opinion has been
expressed on the financial report on which
the summary is based.
Should identify the financial report form
which the summary was derived.
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16. Assurance engagements involving
financial information
Review engagements regarding interim financial
reports
ASRE 2410 Review of a Financial Report
Performed by the Independent Auditor of the
Entity applies to:
A review by the independent auditor of the
entity, of a financial report for a half-year in
accordance with Part 2M.3 of the
Corporations Act 2001; and
A review, by an independent auditor of an
interim financial report for any other purpose.
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17. Assurance engagements other than audits or
reviews of historical financial information
ASAE 3000 Assurance Engagements Other than Audits or
Reviews of Historical Financial Information (ISAE 3000)
establishes the mandatory requirements for undertaking
and reporting on assurance engagements other than
audits or reviews of historical financial information covered
by ASAs or ASREs.
ASAE 3000 (ISAE 3000) uses the term assurance
practitioner, which includes a person or an organisation,
whether in public practice, industry, commerce or the
public sector, involved in the provision of assurance
services.
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18. Assurance engagements other than audits or
reviews of historical financial information
The assurance practitioner should also consider the
following:
Ethical requirements
Quality Control
Acceptance and continuance
Terms of Engagement
Planning and Performance
Materiality
Evidence
Report Content
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19. Examples of assurance engagements other than
those relating to historical financial information
Compliance engagements
Performance engagements
Prospective financial information
Effectiveness of control procedures
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20. Examples of assurance engagements other than
those relating to historical financial information
Sustainability Assurance Reports
Sustainability refers to the notion of conducting
business activities with minimal long-term effect on the
environment.
It implies paying attention to the comprehensive
outcomes of events and actions where practicable,
and being accountable for such outcomes.
This is known as full cost accounting or environmental
accounting.
Reporting guidelines include triple bottom line
reporting, the Global Reporting Initiative (GRI) and the
AA1000 Assurance Standard.
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21. Examples of assurance engagements other than
those relating to historical financial information
Forensic Auditing Engagements
An effective investigative tool to help combat
fraudulent claims, because it investigates the causes
and effect of possibly fraudulent activities or system
failures that may be the consequences of fraud.
The forensic auditor looks for evidence of fraud and
documents system failures, and identifies the extent
of losses incurred can also be used by an insurer to
evaluate the liability of a claim (e.g. a disability claim
through a work-related accident or a system failure
claim through a computer crash.
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22. Examples of assurance engagements other than
those relating to historical financial information
Continuous Audit
The electronic revolution has created a demand for
more timely assurance on a broader range of
information than that provided by the annual audit of
historical financial statements.
Client information is released in a very short
timeframe (via the Internet) and auditors’ reports
on that information follows almost immediately.
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23. Examples of assurance engagements other than
those relating to historical financial information
Continuous Audit (continued)
Thus, a continuous audit is a process or method
that enables independent auditors to provide
written assurance on subject matter using a
series of auditor’s reports issued simultaneously
with, or a short time after, the occurrence of events
underlying the subject matter .
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24. Quality management and
the assurance practitioner
Self-regulatory controls set a minimal list of
mechanisms and standards with which
professional accountants and auditors must
comply, to ensure the quality of the professional
services offered by the profession, and include:
high education entry requirements; and
rigorous induction programs.
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25. Quality management and
the assurance practitioner
character checking on entry to the profession;
compulsory public practice induction;
compulsory continuing professional development;
extensive ethical rulings and codes of conduct;
separate public practice registration;
compulsory quality review programs;
compulsory professional indemnity insurance; and
adherence to detailed and mandatory auditing
standards and auditing pronouncements.
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26. Quality management and
the assurance practitioner
The expansion of services provided by auditors
today has made their roles far more complicated.
It is expected that auditors must not only keep
abreast of current demands in quality delivery
applicable to businesses, but also have the ability
to assess the impact of such standards on their
own work.
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27. Quality management and
the assurance practitioner
The following are some of the benchmarks of
which auditors and professional accountants
must be aware:
ISO standards
ISO 9000
ISO 14000
Total Quality Management (TQM)
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28. ISO Standards
The International Organization for Standardization
(ISO) is a network of the national standards
institutes of148 countries, with a central
secretariat in Geneva, Switzerland, that
coordinates the system.
The ISO acts as a bridging organisation in which
a consensus can be reached on solutions that
meet the requirements of business and society.
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29. ISO Standards
International standards provide a reference
framework, or a common technological language,
between suppliers and their customers.
Most of the ISO standards are highly specific to a
particular product, material or process.
The ISO 9000 and ISO 14000 series are among
the ISO’s most widely known and successful
standards.
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30. ISO Standards
The ISO 9000 series:
An international reference for quality requirements
in business-to-business dealings concerned with
‘quality management’ (what an organisation does
to enhance customer satisfaction by meeting
applicable regulatory requirements and continually
improving its performance in this regard).
Used for certification/registration and contractual
purposes by organisations seeking recognition of
their quality management system
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31. ISO Standards
The ISO 14000 series:
Concerned mainly with ‘environmental management’
(what an organisation does to minimise harmful effects
on the environment, caused by its activities and
to continually improve its environmental performance)
For an environmental management system (EMS) to be
effective, the auditor determines whether an
organisation’s EMS conforms to ISO specifications and
requirements.
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32. Total Quality Management and the
Assurance Practitioner
With auditors becoming increasingly involved in auditing an
entire business, ISO 9000 can be very useful in helping
auditors to identify and review issues that have an impact
on quality management in an organisation.
Arguably, the main consideration in total quality
management (TQM) is its sustainability.
In providing various types of assurance reviews, auditors
are generally able to help management pinpoint the
matters that have a negative impact on the total quality
management of an organisation.
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