1. Part Five Other Assurance Services
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

2. Chapter 14 Other assurance services
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

3. Learning objective 1: The current framework for assurance services
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

4. A review of levels of assurance
Form of engagement for all subject matter (historical financial information)
Level of assurance for all subject matter (historical financial information)
Expression of opinion
reasonable assurance (audit)
reasonable (high)
positive
Limited assurance (review)
limited (moderate)
negative
agreed upon procedures
nil
report of factual findings
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

5. Learning objective 2: Limited assurance (review) engagements
Used when limited (moderate) rather than reasonable (high) level of assurance deemed appropriate.
Involves a reduced set of evidence gathering procedures compared with a reasonable assurance engagement, and is therefore lower cost.
Report provides negative assurance of whether anything has come to auditor’s attention that causes auditor to believe that the subject matter is not fairly presented.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

6. Reviews of financial reports
Limited assurance engagements for financial reports are called reviews.
In planning for a review engagement, knowledge of entity is vital.
Major evidence collection procedures are:
Inquiries of management
Analytical procedures.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

7. Reporting considerations
Important that both client and user understand that
a review is being undertaken, not an audit:
For client, engagement letter and discussion with client must ensure that differences between review and audit are understood.
For user, review report must clearly show that lower level of assurance than that obtained from an audit is provided.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

8. Example of an unqualified review report
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

9. Example of an unqualified review report (cont.)
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

10. Example of an unqualified review report (cont.)
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

11. Example of an unqualified review report (cont.)
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

12. Learning objective 3: Agreed-upon procedures
Such procedures are broad-ranging and can be in any area where the client and user perceive them to be beneficial. For example:
Accounts payable listing is complete and accurate.
Academy Awards votes are confidentially maintained and properly counted.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

13. Importance of understanding what is agreed upon
Engagement letter should clearly set out:
Nature of engagement, and the fact that procedures performed are not an audit or review
List of procedures to be performed as agreed
Anticipated form of report
Restrictions on distribution of report.
Report should clearly state that agreed-upon procedures were undertaken, these procedures do not constitute either an audit or review, and as such, no assurance is expressed.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

14. Learning objective 4: Assurance services on financial information other than general purpose reports
Special purpose reports
Components of financial reports
Compliance with contractual agreements
Summarised financial reports
Due diligence engagements
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

15. Learning objective 5: Assurance services required by specific legislation or regulations
Future-oriented (prospective) financial information
Internal controls, e.g. superannuation reporting obligations
Statistical or highlight-style information, e.g. reporting by authorised deposit-taking institutions (e.g. banks and building societies) for national regulator (Australian Prudential Regulation Authority — APRA).
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

16. Assurance services other than financial report assurance currently being provided
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

17. Prospective financial information
Forecasts: prepared on basis of assumptions of future events expected to take place, and reflect expected future position.
Projections: present hypothetical courses of action and prepared on basis of assumptions not necessarily expected to take place.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

18. Reporting on prospective financial information
Two levels of assurance contained in report:
Positive assurance is provided as to prospective financial information being prepared in accordance with assumptions (e.g. calculations), fairness of presentation.
Moderate assurance is provided on best estimate assumptions. (No opinion is expressed on hypothetical assumptions.)
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

19. Reporting on effectiveness of internal controls
Becoming more common owing to greater emphasis on corporate governance.
Increased demand for this information by management, directors and some regulatory bodies.
Demonstrated by recent changes in the USA as a result of the introduction of the Sarbanes-Oxley Act (SOX). Requirements in SOX are impacting on a number of companies in Australia that are dual-listed on a stock exchange in USA.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

20. Reports on internal control (IC)
Establishing suitable criteria for testing controls is a key aspect. If entity clearly sets out what constitutes a satisfactory IC system, then easier for auditor to undertake audit. There is however no suitably detailed description of IC that would serve as an audit criteria for all entities.
Auditor should assess both design and operating effectiveness of IC systems.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

21. Reporting on statistical or highlight information
Potential growth area for assurance services.
This information is commonly provided, either as part of or separate from a financial report.
Currently auditor provides no assurance on such information but must review for misstatements of fact or material inconsistencies (Refer Ch. 13).
Auditor could provide separate assurance on these key performance indicators.
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett

22. Learning objective 6: Assurance services being promoted by the assurance profession
Many possibilities, but the following are currently provided or proposed, and most expected to have high growth prospects:
Risk assessment (pp. 669–70)
Business performance measurement (p. 670)
Assurance for e-commerce — business to consumer: WebTrust (pp. 670–1)
Assurance for e-commerce — business to business: SysTrust (pp. 671–2)
ElderCare (p. 672)
Assurance on information provided to boards of directors by management (p. 673).
Copyright  2007 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia 3r by Grant Gay and Roger Simnett
Slides prepared by Roger Simnett