Other areas for assurance services are corporate policy compliance, outsourced internal auditing, trading partner accountability, mergers and acquisition, ISO 9000 certification, investment manager’s compliance and World Wide Web assertions.
In some cases, intended users (for example, bankers and regulators) impose arequirement on, or request the responsible party (or the engaging party ifdifferent) to arrange for, an assurance engagement to be performed for aspecific purpose. When engagements are designed for specified intended usersor a specific purpose, the practitioner considers including a restriction in theassurance report that limits its use to those users or that purpose.
Consulting engagements employ a professional accountant’s technical skills, education, observations,experiences, and knowledge of the consulting process. The consulting process is an analytical processthat typically involves some combination of activities relating to: objective-setting, fact-finding,definition of problems or opportunities, evaluation of alternatives, development of recommendationsincluding actions, communication of results, and sometimes implementation and follow-up. Reports (ifissued) are generally written in a narrative (or “long form”) style. Generally the work performed is onlyfor the use and benefit of the client. The nature and scope of work is determined by agreement betweenthe professional accountant and the client. Any service that meets the definition of an assuranceengagement is not a consulting engagement but an assurance engagement.
practitioner reporting on an engagement that is not an assurance engagementwithin the scope of this Framework, clearly distinguishes that report from anassurance report. So as not to confuse users, a report that is not an assurancereport avoids, for example
The term “practitioner” as used in this Framework is broader than the term“auditor” as used in ISAs and ISREs, which relates only to practitionersperforming audit or review engagements with respect to historical financialinformation.24. A practitioner may be requested to perform assurance engagements on a widerange of subject matters. Some subject matters may require specialized skillsand knowledge beyond those ordinarily possessed by an individualpractitioner. As noted in paragraph 17 (a), a practitioner does not accept anengagement if preliminary knowledge of the engagement circumstancesindicates that ethical requirements regarding professional competence will notbe satisfied. In some cases this requirement can be satisfied by the practitionerusing the work of persons from other professional disciplines, referred to asexperts. In such cases, the practitioner is satisfied that those persons carryingout the engagement collectively possess the requisite skills and knowledge,and that the practitioner has an adequate level of involvement in theengagement and understanding of the work for which any expert is used.The subject matter, and subject matter information, of an assuranceengagement can take many forms, such as:• Financial performance or conditions (for example, historical orprospective financial position, financial performance and cash flows)for which the subject matter information may be the recognition,measurement, presentation and disclosure represented in financialstatements.• Non-financial performance or conditions (for example, performance ofan entity) for which the subject matter information may be keyindicators of efficiency and effectiveness.• Physical characteristics (for example, capacity of a facility) for whichthe subject matter information may be a specifications document.• Systems and processes (for example, an entity’s internal control or ITsystem) for which the subject matter information may be an assertionabout effectiveness.• Behavior (for example, corporate governance, compliance withregulation, human resource practices) for which the subject matterinformation may be a statement of compliance or a statement ofeffectiveness.Criteria are the benchmarks used to evaluate or measure the subject matterincluding, where relevant, benchmarks for presentation and disclosure. Criteriacan be formal, for example in the preparation of financial statements, thecriteria may be International Financial Reporting Standards or InternationalPublic Sector Accounting Standards; when reporting on internal control, thecriteria may be an established internal control framework or individual controlobjectives specifically designed for the engagement; and when reporting oncompliance, the criteria may be the applicable law, regulation or contract.Examples of less formal criteria are an internally developed code of conduct oran agreed level of performance (such as the number of times a particularcommittee is expected to meet in a year).
The practitioner plans and performs an assurance engagement with an attitudeof professional skepticism to obtain sufficient appropriate evidence aboutwhether the subject matter information is free of material misstatement. Thepractitioner considers materiality, assurance engagement risk, and the quantityand quality of available evidence when planning and performing the engagement, in particular when determining the nature, timing and extent ofevidence-gathering procedures.The practitioner plans and performs an assurance engagement with an attitudeof professional skepticism recognizing that circumstances may exist that causethe subject matter information to be materially misstated. An attitude ofprofessional skepticism means the practitioner makes a critical assessment,with a questioning mind, of the validity of evidence obtained and is alert toevidence that contradicts or brings into question the reliability of documents orrepresentations by the responsible party. For example, an attitude ofprofessional skepticism is necessary throughout the engagement process forthe practitioner to reduce the risk of overlooking suspicious circumstances, ofover generalizing when drawing conclusions from observations, and of usingfaulty assumptions in determining the nature, timing and extent of evidencegathering procedures and evaluating the results thereof.
An assurance engagement rarely involves the authentication of documentation,nor is the practitioner trained as or expected to be an expert in suchauthentication. However, the practitioner considers the reliability of theinformation to be used as evidence, for example photocopies, facsimiles,filmed, digitized or other electronic documents, including consideration ofcontrols over their preparation and maintenance where relevant
A practitioner does not express an unqualified conclusion for either type ofassurance engagement when the following circumstances exist and, in thepractitioner’s judgment, the effect of the matter is or may be material:(a) There is a limitation on the scope of the practitioner’s work (seeparagraph 55). The practitioner expresses a qualified conclusion or adisclaimer of conclusion depending on how material or pervasive thelimitation is. In some cases the practitioner considers withdrawingfrom the engagement.(b) In those cases where:(i) The practitioner’s conclusion is worded in terms of theresponsible party’s assertion, and that assertion is not fairlystated, in all material respects; or(ii) The practitioner’s conclusion is worded directly in terms of thesubject matter and the criteria, and the subject matterinformation is materially misstated,11the practitioner expresses a qualified or adverse conclusion dependingon how material or pervasive the matter is.When it is discovered after the engagement has been accepted, that thecriteria are unsuitable or the subject matter is not appropriate for anassurance engagement. The practitioner expresses:(i) A qualified conclusion or adverse conclusion depending on howmaterial or pervasive the matter is, when the unsuitable criteriaor inappropriate subject matter is likely to mislead the intendedusers; or(ii) A qualified conclusion or a disclaimer of conclusion dependingon how material or pervasive the matter is, in other cases.In some cases the practitioner considers withdrawing from theengagement.
Assurance engagement and prospective financial information 2
ASSURANCE ENGAGEMENTS AND PROSPECTIVE FINANCIAL INFORMATION Part I Compiled by Sako Mayrick1 Sako Mayrick
COMPLEMENTARY READING Handbook of International Quality Control, Auditing Review, Other Assurance, and Related Services Pronouncements, 2012 Edition Volume II IESBA Ethical Requirements International Financial Reporting Standards2 Sako Mayrick
Introduction to Assurance Engagements AICPA defines assurance engagements as „Independent Professional Services that improve information quality or its context. „Assurance services reduce the information risk; risk that the information provided is incorrect, on more than just financial data. The major purpose of assurance services is to provide independent and professional opinions that improve the quality of3 information to management as well as other Sako Mayrick
Audit and Assurance Engagements Audits actually can be considered a type of assurance service. However, audits are only designed to test the validity of the financial statements and that only. Under an assurance engagement CPAs can provide a variety of services ranging from information systems security reviews to customer satisfaction surveys. Unlike audit and attestation services that are often highly structured, assurance services tend to be customized and implemented when performed for a smaller group of decision makers within the firm. Often Mayrick Sako managers must make decisions on things they4 have incomplete or inaccurate data for, and decisions
Assurance Services and Consultancy Assurance services can test financial and non-financial information; due to this assurance services can be classified as consulting services. However, assurance services are not considered consulting because in consulting services generally, a practitioner (Certified Public Accountant) uses his professional knowledge to make recommendations for a future event or a procedure, such as the design of an information system or accounting control system. In contrast, assurance services are designed to test the validity of past data of the business cycles. Although there is no boundary to what a practitioner can test in assurance services, a practitioner will not likely accept an Sako Mayrick 5 assurance engagement in which his firm or previous
Examples of Assurance Services Assurance Services Non Assurance Services Business risk Bookkeeping and assessment Accounting Information System Tax Services Security Review Customer Satisfaction Certain Management survey Consultancy Internal Audit Other Management outsourcing Consultancy Accounts Receivable6 Review Sako Mayrick
Categories of Assurance Risk assessment – assurance that an entity‟s profile of business risks is comprehensive and evaluation of whether the entity has appropriate systems in place to effectively manage those risks. Business performance measurement – assurance that an entity performance measurement system contain relevant and reliable measures for assessing the degree to which the entity‟s goals and objectives are achieved or how its performance compares to competitors. Information system reliability – assurance that an entity‟s internal information system provide information for operating and financial decisions. Electronic commerce – assurance that systems an tools used in electronic commerce provide appropriate data integrity, security, privacy and reliability.7 Health care (any other discipline) performance measurement – Sako Mayrick assurance about the effectiveness of the subject matter provided
INTERNATIONAL FRAMEWORK FOR ASSURANCE ENGAGEMENT (AE) Aim at defining, describing the elements and objectives of an assurance engagement It identified engagements to which ISA, ISRE and ISAE apply It provides frame of reference for CPA –PP Others involved with assurance engagements including intended users of report and other parties8 It is used by IAASB in its development of ISA, Sako Mayrick ISAEs and ISREs
INTERNATIONAL FRAMEWORK FOR ASSURANCE ENGAGEMENT Framework is not a standard neither it provides procedural requirement Principles are contained in ISAs, ISREs and ISAEs Principles, essential procedures and related guidance consistent with the framework It contains six major parts; introduction, definition and objective of assurance engagement, scope of the framework, engagement acceptance, elements 9 Sako Mayrick of assurance engagement and inappropriate
INTERNATIONAL FRAMEWORK FOR ASSURANCE ENGAGEMENT Practitioners in assurance engagement are governed by ISAs, ISAEs, ISRE‟s Framework Code of Ethics for Professional Accountants International Standards on Quality control10 Sako Mayrick
Meaning of assurance engagement Is an engagement in which a practitioner expresses conclusion designed to enhance the degree of confidence of intended users other than responsible party about the outcome of evaluation or measurement of subject matter against criteria. Express conclusion Enhance degree of confidence of users ( not party) on outcome Evaluation of subject matter against criteria11 Sako Mayrick
Examples of Evaluation Recognition, measurement, presentation and disclosure represented in the financial statements (outcome) from applying IFRS (Criteria) to the entity‟s financial position, financial performance and cash flows (subject matter) An assertion about effectiveness of IC (Outome) results from applying framework for evaluating effectiveness on IC such as (COSO) or (CoCo) (Criteria) to internal control process (subject matter) Sako Mayrick12 Subject matter information is also used to mean
Assertion based or direct reporting engagements In assertion based, evaluation of subject matter is performed by responsible party, the subject matter information is in form of an assertion by the responsible party that is made available to the intended users In direct reporting engagement, the practitioner either directly performs the evaluation or measurement of the subject matter, or obtains a representation from the responsible party that has performed the evaluation or measurement that is not available to the intended users. The subject matter information is provided to the intended users in the assurance report. In direct reporting engagement, the responsible party is responsible for the subject matter BUT in assertion based engagement a responsible party is responsible for subject matter information (the assertion), and may be responsible for subject matter. A responsible party may or may not be a party who engages13 Sako Mayrick the practitioner (the engaging party)
Reasonable assurance and limited assurance Reasonable assurance is the reduction in assurance engagement risk to an acceptably low level in circumstances of engagement as a basis of a positive form of expression of practitioners conclusion Limited assurance is the reduction of assurance engagement risks to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than Sako Mayrick for a reasonable assurance14 engagement, as a basis of a negative form
Circumstances of engagement Terms of engagement e.g. reasonable or limited Characteristics of the subject matter The criteria to be used Needs of the intended users, Relevant characteristics of the responsible party and its environment Other matters e.g events, transactions,15 conditions and practices that may have Sako Mayrick
Scope of the AE as per Framework Not all AE are covered unless it meets the definition, examples not covered; Engagements covered by ISREs e.g. agreed upon procedures engagement and compilation of financial and other information Preparation of tax returns Consulting (or advisory)engagements e.g. management and tax consulting16 An AE may be part of a larger engagement Sako Mayrick
Other Non- AE though meets definition Legal testimony in accounting, auditing, taxation or other matters Professional opinion, views or wording In non assurance engagement, practitioners should avoid to use words such as Framework, ISAs, ISREs or ISAEs; inappropriately use the words, assurance, audit or review; or including a statement that could reasonably mistaken for conclusion designed to enhance degree of confidence of intended users about the outcome of evaluation or measurement or subject matter against a criteria17 Sako Mayrick
Pre- condition to accept AE Relevant ethical requirements e.g. independences, professional competence are satisfied The following are exhibited Subject matter is appropriate Criteria is suitable Access to sufficient appropriate evidence Conclusion on reasonable or limited assurance is contained in a written report Satisfaction on rational purpose for the18 engagement Sako Mayrick
Elements of AE A three party relationship Practitioner, responsible party and intended users An appropriate subject matter Suitable criteria Sufficient appropriate evidence A written assurance report in a form appropriate to a reasonable assurance engagement or a limited assurance19 Sako Mayrick engagement
Characteristics of suitable criteria Relevance Completeness Reliability Neutrality; free from bias Understandability Criteria can either be established or specifically developed. established criteria are those embodied in laws or regulations, or issued by authorized or recognized bodies of experts that follow a transparent due process. Specifically developed criteria are those designed for the purpose of the engagement. Whether criteria are established or specifically developed affects the work that the practitioner carries out to assess their suitability for a particular engagement. Sako Mayrick20
Professional Skepticism The practitioner plans and performs an assurance engagement with an attitude of professional skepticism recognizing that circumstances may exist that cause the subject matter information to be materially misstated. An attitude of professional skepticism means the practitioner makes a critical assessment, with a questioning mind, of the validity of evidence obtained and is alert to evidence that contradicts or brings into question the reliability of documents or representations by the responsible party. For example, an attitude of professional skepticism is necessary throughout the engagement process for the practitioner to reduce the risk of overlooking suspicious circumstances, of over generalizing when drawing21 Sako Mayrick conclusions from observations, and of using faulty
Sufficiency and appropriateness of evidence Sufficiency is a measure of quantity of evidence. Appropriateness is a measure of the quality of evidence; that is its relevance and reliability. The quantity of evidence is affected by the risk of the subject matter information being materially misstated and the quality of such22 evidence. Sako Mayrick
Reliability of evidence Evidence is more reliable when it is obtained from independent sources outside the entity. Evidence that is generated internally is more reliable when the related controls are effective. Evidence obtained directly by the practitioner (for example, observation of the application of a control) is more reliable than evidence obtained indirectly or by inference (for example, inquiry about the application of a control). Evidence is more reliable when it exists in documentary form, whether paper, electronic, or other media (for example, a contemporaneously written record of a meeting is more reliable than a subsequent oral representation of what was discussed). Evidence provided by original documents is more reliable than evidence provided by photocopies or facsimiles.23 Sako Mayrick
Assurance Engagement Risks Assurance engagement risk is the risk that the practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated Inherent (subject matter) risks Control Risks Detection Risks24 Sako Mayrick
Assurance Engagement Report Reasonable assurance the practitioner expresses the conclusion in the positive form, for example: “In our opinion internal control is effective, in all material respects, based on XYZ criteria.” Limited assurance the practitioner expresses the conclusion in the negative form, for example, “Based on our work described in this report, nothing has come toour attention that causes us to believe that internalcontrol is not effective, in all material respects, basedon XYZMayrick25 Sako criteria.”
INTERNATIONAL STANDARDS ISREs (2000 -2699) ISREs 2400 - Engagement to Review Financial Statements Prev. ISA 910 ISAREs 2410 - Review of Interim Financial Information Performed by independent Auditor of the Entity ISAEs ( 3000 – 3699) ISAE 3000 Assurance Engagement other than Audits or Reviews of HFI ISAE 3400 Examination of Prospective Financial Information Prev. ISA 810 ISAE 3402 Assurance Reports on Controls at a Service Organization ISRSs ISRE 4400 – Engagement to perform agreed upon procedures26 Engagements to Compile FS (ISA 920 and 930 respectively) Sako Mayrick
ENGAGEMENT TO REVIEW FS ISRE 2400 Done by a Practitioner who is not an auditor of an entity For a practitioner who is the auditor of the entity performs similar review according to ISRE 2410 “Review of Interim Financial Information Performed by an independent Auditor of the Entity” Sako Mayrick27
Objective of Rev. Engagement Practitioner using appropriate procedures which do not provide evidence that would be required in an audit Anything has come to the practitioner to believe that the FS are not prepared in all material respects, in accordance with applicable FRF (Negative Assurance) Practitioner should comply with the IESBA Code of Professional Ethics such as independence, Integrity, Objectivity, due care, confidentiality, competence, professional behavior and technical standards.28 Sako Mayrick Scope of the review is ISRE and it provides
Terms of Engagement It includes Objective Management Responsibility for FS Scope of the review including reference to ISRE Unrestricted access to records, documentation and information Sample report Fact that engagement cannot be relied to disclose errors and other irregularities fraud etc Statement that this is not an audit29 Sako Mayrick
Procedures in RE Understanding of the entity and industry Inquiries on accounting principles and practices Inquiries on procedures for recording, classifying and summarizing transactions Inquiries on material assertions in the FS Analytical procedures Comparison of FS of current and previous period Comparison of FS with anticipated results Study relationship of elements of FS with patterns and Industry norms Inquiries of the meetings actions for BoD, committees and shareholders Reading the FS on conformity to the basis of accounting Reports from other practitioners Inquiries to a person with responsibility on accounting matters Whether all transactions have been recorded Whether FS are prepared in accordance with the basis indicated Changes of business activities or accounting principles Management representation30 Subsequent events Sako Mayrick Read appendix 2 of ISRE for detailed procedures
Reporting Negative form of assurance “nothing has come to the practitioner‟s attention based on the review thatcauses the practitioner to believe thefinancial statements do not give a true andfair view (or are not presented fairly, in allmaterial respects) in accordance with theapplicable financial reporting framework(negative assurance)‟‟31 Sako Mayrick
ISRE 2410 Review of Interim Fin. Information Is performed by an independent auditor of the entity Objective of an engagement to review interim financial information is to enable the auditor to express a conclusion whether, on the basis of the review, anything has come to the auditor‟s attention that causes the auditor to believe that the interim financial information is not prepared, in all material respects, in accordance with an applicable financial reporting framework. The auditor makes inquiries, and performs analytical and other review procedures in order to reduce to a moderate level the risk of expressing an inappropriate conclusion when the interim financial32 information is materially misstated. Sako Mayrick
ISAE 3000 Assurance Engagements other than audits or reviews of HFI The ISAE uses the terms reasonable assurance engagement and limited assurance engagement The objective of a reasonable assurance engagement is a reduction in assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioner‟s conclusion. The objective of a limited assurance engagement is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of 33expression of the practitioner‟s conclusion Sako Mayrick
ISAE 3000 Acceptance The practitioner should accept (or continue where applicable) an assurance engagement only if the subject matter is the responsibility of a party other than the intended users or the practitioner. The practitioner should accept (or continue where applicable) an assurance engagement only if, on the basis of a preliminary knowledge of the engagement circumstances, nothing comes to the attention of the practitioner to indicate that the requirements of the IESBA Code or of the ISAEs34 will not be satisfied. Sako Mayrick
Engagement and Planning Written form of engagement is recommended Planning Developing of overall scope and strategy, timing and conduct of engagement Characteristics of the subject matter Understanding of the entity Engagement process and possible sources of evidence Identification of intended users, materiality and risks Personnel and expertise requirement including nature and extend of expert‟s involvement Professional skepticism Professional judgment35 Sako Mayrick
Understanding of the subject matter Subject matter should be understood to clearly identify and assess the risks of subject matter information Materiality and engagement risks Appropriateness of the subject matter Adequate skills and knowledge on subject matter Obtain sufficient evidence of expert36 work Sako Mayrick
Obtaining evidence Sufficiency and appropriate Professional skepticism Practitioner should consider the reliability of information to be used as evidence e.g. photocopies, facsimiles, filmed, digitized and other electronic documents including consideration of controls Evidence is part of iterative process Understanding subject matter Assessment of risk and response for NTE of audit procedures Perform procedures linked to identified risks using combination of Inspection, Observation, confirmation, recalculation, re- performance, Analytical procedures and inquiry including corroborating information. Evaluation the sufficiency and appropriateness of evidence37 Sako Mayrick
Quality Control and Quality Review Quality Control Policies and procedures to provide reasonable assurance on compliance to professional standards and regulatory and legal requirements and reports are appropriate Quality Control review Process to provide an objective evaluation before the report is issued, of the significant judgments the engagement team made and Sako Mayrick38 conclusions they reached in reporting
Elements of quality control Leadership Ethical requirements Acceptance and continuance of client relationship and specific engagements Human resources Engagement performance39 Monitoring Sako Mayrick
Subsequent events and other procedures See detailed procedures on Appendix 2 of ISREs as applicable in this ISAE40 Sako Mayrick
Reporting Reasonable assurance In our opinion internal control is effective, in all material respects, based on XYZ criteria” or “Inour opinion the responsible party’s assertion that internal control is effective, in all material respects, based on XYZ criteria, is fairly stated Limited assurance Based on our work described in this report, nothing has come to our attention that causes us tobelieve that internal control is not effective, in allmaterial respects, based on XYZ criteria” or “Based onour work described in this report, nothing has come toour attention that causes us to believe that the responsible Sako Mayrickparty’s assertion that internal control is effective, in all41
ISAE 3400 (ISA 810)PROSPECTIVE FINANCIALINFORMATION The purpose of this International Standard on Assurance Engagements (ISAE) is to establish standards and provide guidance on engagements to examine and report on prospective financial information including examination procedures for best-estimate and hypothetical assumptions. This ISAE does not apply to the examination of prospective financial information expressed in general or narrative terms, such as that found in management‟s discussion and analysis in an entity‟s annual report, though many of the42 procedures outlined herein may be suitable for Sako Mayrick
ObjectivesIn an engagement to examine prospective financial information, theauditor should obtain sufficient appropriate evidence as to whether:(a) Management’s best-estimate assumptions on which the prospectivefinancial information is based are not unreasonable and, in the case ofhypothetical assumptions, such assumptions are consistent with the purposeof the information;(b) The prospective financial information is properly prepared on the basis ofthe assumptions;(c) The prospective financial information is properly presented and all material assumptions are adequately disclosed, including a clear indicationas to whether they are best-estimate assumptions or hypotheticalassumptions; and(d) The prospective financial information is prepared on a consistentbasis with historical financial statements, using appropriate accounting principles. Sako Mayrick43
Prospective Financial Information Means financial information based on assumptions about events that may occur in the future and possible actions by an entity. It is highly subjective in nature and its preparation requires the exercise of considerable judgment. Prospective financial information can be in the form of a forecast, a projection or a44 combination of both, for example, a Sako Mayrick
Forecasts and Projections A “forecast” means prospective financial information prepared on the basis of assumptions as to future events which management expects to take place and the actions management expects to take as of the date the information is prepared (best-estimate assumptions). A “projection” means prospective financial information prepared on the basis of: (a) Hypothetical assumptions about future events and management actions which are not necessarily expected to take place, such as when some entities are in a start-up phase or are considering a major change in the nature of operations; or (b) A mixture of best-estimate and hypothetical assumptions.Such information illustrates the possible consequences as of the date theinformation is prepared if the events and actions were to occur (a “what-if”scenario). Mayrick 45 Sako
PFI Uses and responsibility Prospective financial information can include financial statements or one or more elements of financial statements and may be prepared:(a) As an internal management tool, for example, to assist inevaluating a possible capital investment; or(b) For distribution to third parties in, for example: • A prospectus to provide potential investors with informationabout future expectations. • An annual report to provide information to shareholders,regulatory bodies and other interested parties. • A document for the information of lenders which may include,for example, cash flow forecasts. It is management responsibility for preparation and presentation of prospective financial information The auditor is, therefore, not in a position to express an opinion as to whether the results shown in the prospective financial information will be achieved. And therefore it is a moderate level of46 assurance Sako Mayrick
Acceptance of Engagement Prerequisite Intended uses of the information Distribution, general or limited Nature of assumptions Elements to be included in the information Period covered by information There should be clear terms of engagement Obtain sufficient level of knowledge about the business and significant assumptions e.g. controls, documentation on assumptions, statistical , mathematical and CAATs; accuracy of information Consider the extent of reliance on historical financial Sako Mayrick47 information
Period covered and examination procedures Period covered Operating cycle e.g. project Degree of reliability of assumptions Needs of users Examination procedures Data reliability Knowledge obtaining during any previous engagements Management competence on preparation of prospective financial information48 Adequacy and reliability of underlying data Sako Mayrick
Presentation and Disclosure PFI is information and not misleading Accounting policies Assumptions should be clearly disclosed and whether they represent managements best estimate or hypothetical49 Sako Mayrick
Reporting Title, address and identification of PFI Reference to ISAE Statement of management responsibility Reference to purpose of PFI Statement of negative assurance whether the assumptions provides a reasonable basis for PFI50 Sako Mayrick Caveat on achievability of results
ISAE 3402 ASSURANCE REPORTS ON CONTROLS AT SERVICE LEVEL ORGANIZATION Service organization – A third-party Organization (or segment of a third- party organization) that provides services to user entities that are likely to be relevant to user entities‟ internal control as it relates to financial reporting. The service auditor should also comply51 with ISAE and ISAE 3000 Sako Mayrick
ISAE 3402ASSURANCE REPORTS ON CONTROLS AT SERVICE LEVEL ORGANIZATION This International Standard on Assurance Engagements (ISAE) deals with assurance engagements undertaken by a professional accountant in public practice1 to provide a report for use by user entities and their auditors on the controls at a service organization that provides a service to user entities that is likely to be relevant to user entities‟ internal control as it relates to financial reporting. In addition to issuing an assurance report on controls, a service auditor may also be engaged to provide reports such as the following, which are not dealt with in this ISAE: (a) A report on a user entity‟s transactions or balances maintained by a service organization; or (b) An agreed-upon procedures report on controls at a52 Sako Mayrick service organization.
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