Introduction to Audit & Assurance - Chapter 1 ACCA F8 (AA). Relevant to ACCA paper Audit and Assurance. By Sanjay Pradhan - Seed Financial Academy, Kumari Marg ,Dillibazzar.

1. INTRODUCTION TO ASSURANCE
AUDIT AND ASSURANCE

2. ASSURANCE

3. WHY??????

4. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence in
order to express 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

5. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence in
order to express 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

6. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

7. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

8. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

9. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

10. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

11. ASSURANCE
An engagement in which a practitioner
obtains sufficient appropriate evidence
in order to express 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

12. ELEMENTS OF ASSURANCE ENGAGEMENT
Three Party Involvement
Appropriate Subject Matter
Suitable Criteria
Sufficient Appropriate Evidence
Written Assurance Report in an
Appropriate Form

13. TYPES OF ENGAGEMENT
REASONABLE ASSURANCE
ENGAGEMENT(POSITIVE)
LIMITED ASSURANCE
ENGAGEMENT(NEGATIVE)

14. REASONABLE ASSURANCE
 Gathers sufficient appropriate evidence to be
able to draw reasonable conclusions
 Concludes that the subject matter conforms in
all material respects with identified suitable
criteria
 Gives a positively worded assurance opinion
 Gives a High Level of assurance(confidence)
 Performs very thorough procedures

15. EXAMPLES-REASONABLE ASSURANCE
 In our opinion internal control is effective, in all
material respects, based on ABC criteria
 The accounts show a true and fair view.
 The cash flow forecast is correct
 The appointment of the employee is fair

16. LIMITED ASSURANCE
 Gathers sufficient appropriate evidence to be
able to draw limited conclusions
 Concludes that the subject matter with respect to
identified suitable criteria, is plausible in the
circumstances
 Gives a negatively worded assurance opinion
 Gives a moderate or lower level of
assurance(confidence)
 Performs significantly fewer procedures.

17. EXAMPLES-LIMITED ASSURANCE
 Based on our work described in the report,
nothing has come to our attention that causes us
to believe that internal control is not effective, in
all material respects, based on ABC criteria
 We have discovered nothing wrong with the
accounts
 The basis of the forecast is not unreasonable
 There is no evidence of discrimination in the
appointment

18. EXTERNAL AUDIT ENGAGEMENT
(REASONABLE ASSURANCE)
 Purpose- To enhance the degree of confidence of
intended users in financial statements (ISA 200 Overall
Objectives of the Independent Auditor and the Conduct of
Audit in accordance with ISAs)
 Opinion- Financial Statements show true and fair view &
Financial statements are prepared, in all material
respects , in accordance with an applicable financial
reporting framework.
 True- Factually correct information
 Fair- Clear, Impartial and Unbiased information

19. OBJECTIVES OF AUDITOR
 Obtain reasonable assurance about whether the
financial statements as a whole are free from
material misstatement, whether due to fraud or
error
 Express an opinion on whether the financial
statements are prepared, in all material respects, in
accordance with an applicable financial reporting
framework
 Report on the financial statements and communicate
as required by ISAs, in accordance with the auditor’s
findings

20. NEED FOR EXTERNAL AUDIT

21. NEED FOR EXTERNAL AUDIT
 Shareholders-Provide Finance and May not
be Involved in Day to Day Management
 Directors-Manages company on behalf of
shareholders, must prepare financial
statements and may have various reasons
to manipulate the financial statements and
show different level of performance
 Need for An Independent Review

22. BENEFITS OF EXTERNAL AUDIT
Higher quality information
Independent scrutiny and verification
Reduced Risk of management bias,
fraud and error
Enhanced credibility of FS
Deficiencies in the Internal Control
System highlighted

23. EXPECTATION GAP
REASONABLE
ASSURANCE ABSOLUTE
ASSURANCE

24. EXPECTATION GAP
A belief that auditors test all
transactions and events
A belief that auditors are required to
detect all fraud
A belief that auditor are responsible
for preparing the financial statements

25. LIMITATIONS OF AN AUDIT
 Inclusion of subjective estimates and judgements
in Financial statements
 Reliance on Internal Control Systems which have
their own inherent limitations
 Reliance on Management Representations as only
source of evidence in some areas
 Persuasive Evidence rather than Conclusive
Evidence
 Sampling

26. REVIEW ENGAGEMENT
A Review Engagement
Voluntary
Analytical Procedures
Make Enquiries
Negative Assurance Report

28. SEPARATION OF OWNERSHIP AND
CONTROL

29. SEPARATION OF OWNERSHIP AND
CONTROL

30. KEY DEFINITIONS
Accountability
• People in position of power can be held to account for their actions
Stewardship
• Responsibility to take good care of resources
Fiduciary
relationship
• Relationship of good faith , duty of care towards someone

31. “GROW WITH US”
SEED
FINANCIAL ACADEMY