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AUE2601 Exam Study Notes
Summary
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GENERAL PRINCIPLES OF ASSURANCE ENGAGEMENTS
ASSURANCE ENGAGEMENTS
Introduction
1. This Framework defines and describes the elements and objectives of an
assurance engagement and identifies engagements to which International
Standards on Auditing (ISAs), International Standards on Review
Engagements (ISREs) and International Standards on Assurance
Engagements (ISAEs) apply. It provides a frame of reference for:
(a) Professional accountants in public practice (“practitioners”) when
performing assurance engagements. Professional accountants in the public
sector refer to the Public Sector Perspective at the end of the Framework.
Professional accountants who are neither in public practice nor in the public
sector are encouraged to consider the Framework when performing
assurance engagements;
(b)Others involved with assurance engagements, including the intended
users of an assurance report and the responsible party; and
(c) The International Auditing and Assurance Standards Board
(IAASB) in its development of ISAs, ISREs and ISAEs.
2. This Framework does not itself establish standards or provide procedural
requirements for the performance of assurance engagements. ISAs, ISREs
and ISAEs contain basic principles, essential procedures and related
guidance, consistent with the concepts in this Framework, for the
performance of assurance engagements. The relationship between the
Framework and the
ISAs, ISREs and ISAEs is illustrated in the “Structure of Pronouncements Issued by
the IAASB” section of the Handbook of International Auditing, Assurance, and
Ethics Pronouncements.
3. The following is an overview of this Framework:
•Introduction: This Framework deals with assurance engagements
performed by practitioners. It provides a frame of reference for
practitioners and others involved with assurance engagements, such as
those engaging a practitioner (the “engaging party”).
•Definition and objective of an assurance engagement: This section defines
assurance engagements and identifies the objectives of the two types of
assurance engagement a practitioner is permitted to perform.
This Framework calls these two types reasonable assurance engagements and
limited assurance engagements.
•Scope of the Framework: This section distinguishes assurance
engagements from other engagements, such as consulting
engagements.
•Engagement acceptance: This section sets out characteristics that
must be exhibited before a practitioner can accept an assurance
engagement.
•Elements of an assurance engagement: This section identifies and discusses five
elements assurance engagements performed by practitioner’s exhibit: a
three party relationship, a subject matter, criteria, evidence and an
assurance report. It explains important distinctions between reasonable
assurance engagements and limited assurance engagements (also outlined in
the Appendix). This section also discusses, for example, the significant
variation in the subject matters of assurance engagements, the required
characteristics of suitable criteria, the role of risk and materiality in assurance
engagements, and how conclusions are expressed in each of the two types of
assurance engagement.
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•Inappropriate use of the practitioner’s name: This section discusses implications of a
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practitioner’s association with a subject matter.
Ethical Principles and Quality Control Standards
4. In addition to this Framework and ISAs, ISREs and ISAEs, practitioners
who perform assurance engagements are governed by:
(a) The IFAC Code of Ethics for Professional Accountants (the Code), which
establishes fundamental ethical principles for professional accountants; and
(b)International Standards on Quality Control (ISQCs), which establish
Professional Skepticism
The auditor shall plan and perform an audit with professional
skepticism recognizing that circumstances may exist that cause
the financial statements to be materially misstated.
A18. Professional skepticism includes being alert to, for example:
•Audit evidence that contradicts other audit evidence obtained.
•Information that brings into question the reliability of documents and
responses to inquiries to be used as audit evidence.
•Conditions that may indicate possible fraud.
•Circumstances that suggest the need for audit procedures in addition to those
required by the ISAs.
A19. Maintaining professional skepticism throughout the audit is
necessary if the auditor is, for example, to reduce the risks of:
•Overlooking unusual circumstances.
•Over generalizing when drawing conclusions from audit observations.
•Using inappropriate assumptions in determining the nature, timing
and extent of the audit procedures and evaluating the results
thereof.
A20. Professional skepticism is necessary to the critical assessment of audit
evidence. This includes questioning contradictory audit evidence and the
reliability of documents and responses to inquiries and other information
obtained from management and those charged with governance. It also
includes consideration of the sufficiency and appropriateness of audit evidence
obtained in the light of the circumstances, for example, in the case where
fraud risk factors exist and a single document, of a nature that is susceptible to
fraud, is the sole supporting evidence for a material financial statement
amount.
A21. The auditor may accept records and documents as genuine unless the
auditor has reason to believe the contrary. Nevertheless, the auditor is
required to consider the reliability of information to be used as audit
evidence. In cases of doubt about the reliability of information or indications
of possible fraud (for example, if conditions identified during the audit cause
the auditor to believe that a document may not be authentic or that terms in
a document may have been falsified), the ISAs require that the auditor
investigate further and determine what modifications or additions to audit
procedures are necessary to resolve the matter.
A22. The auditor cannot be expected to disregard past experience of the
honesty and integrity of the entity’s management and those charged with
governance. Nevertheless, a
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AUE2601 Exam Study Notes
Summary
Downloaded by DJ poppy paps
, lOMoARcPSD|11450120
GENERAL PRINCIPLES OF ASSURANCE ENGAGEMENTS
ASSURANCE ENGAGEMENTS
Introduction
1. This Framework defines and describes the elements and objectives of an
assurance engagement and identifies engagements to which International
Standards on Auditing (ISAs), International Standards on Review
Engagements (ISREs) and International Standards on Assurance
Engagements (ISAEs) apply. It provides a frame of reference for:
(a) Professional accountants in public practice (“practitioners”) when
performing assurance engagements. Professional accountants in the public
sector refer to the Public Sector Perspective at the end of the Framework.
Professional accountants who are neither in public practice nor in the public
sector are encouraged to consider the Framework when performing
assurance engagements;
(b)Others involved with assurance engagements, including the intended
users of an assurance report and the responsible party; and
(c) The International Auditing and Assurance Standards Board
(IAASB) in its development of ISAs, ISREs and ISAEs.
2. This Framework does not itself establish standards or provide procedural
requirements for the performance of assurance engagements. ISAs, ISREs
and ISAEs contain basic principles, essential procedures and related
guidance, consistent with the concepts in this Framework, for the
performance of assurance engagements. The relationship between the
Framework and the
ISAs, ISREs and ISAEs is illustrated in the “Structure of Pronouncements Issued by
the IAASB” section of the Handbook of International Auditing, Assurance, and
Ethics Pronouncements.
3. The following is an overview of this Framework:
•Introduction: This Framework deals with assurance engagements
performed by practitioners. It provides a frame of reference for
practitioners and others involved with assurance engagements, such as
those engaging a practitioner (the “engaging party”).
•Definition and objective of an assurance engagement: This section defines
assurance engagements and identifies the objectives of the two types of
assurance engagement a practitioner is permitted to perform.
This Framework calls these two types reasonable assurance engagements and
limited assurance engagements.
•Scope of the Framework: This section distinguishes assurance
engagements from other engagements, such as consulting
engagements.
•Engagement acceptance: This section sets out characteristics that
must be exhibited before a practitioner can accept an assurance
engagement.
•Elements of an assurance engagement: This section identifies and discusses five
elements assurance engagements performed by practitioner’s exhibit: a
three party relationship, a subject matter, criteria, evidence and an
assurance report. It explains important distinctions between reasonable
assurance engagements and limited assurance engagements (also outlined in
the Appendix). This section also discusses, for example, the significant
variation in the subject matters of assurance engagements, the required
characteristics of suitable criteria, the role of risk and materiality in assurance
engagements, and how conclusions are expressed in each of the two types of
assurance engagement.
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, lOMoARcPSD|11450120
•Inappropriate use of the practitioner’s name: This section discusses implications of a
Downloaded by DJ poppy paps
, lOMoARcPSD|11450120
practitioner’s association with a subject matter.
Ethical Principles and Quality Control Standards
4. In addition to this Framework and ISAs, ISREs and ISAEs, practitioners
who perform assurance engagements are governed by:
(a) The IFAC Code of Ethics for Professional Accountants (the Code), which
establishes fundamental ethical principles for professional accountants; and
(b)International Standards on Quality Control (ISQCs), which establish
Professional Skepticism
The auditor shall plan and perform an audit with professional
skepticism recognizing that circumstances may exist that cause
the financial statements to be materially misstated.
A18. Professional skepticism includes being alert to, for example:
•Audit evidence that contradicts other audit evidence obtained.
•Information that brings into question the reliability of documents and
responses to inquiries to be used as audit evidence.
•Conditions that may indicate possible fraud.
•Circumstances that suggest the need for audit procedures in addition to those
required by the ISAs.
A19. Maintaining professional skepticism throughout the audit is
necessary if the auditor is, for example, to reduce the risks of:
•Overlooking unusual circumstances.
•Over generalizing when drawing conclusions from audit observations.
•Using inappropriate assumptions in determining the nature, timing
and extent of the audit procedures and evaluating the results
thereof.
A20. Professional skepticism is necessary to the critical assessment of audit
evidence. This includes questioning contradictory audit evidence and the
reliability of documents and responses to inquiries and other information
obtained from management and those charged with governance. It also
includes consideration of the sufficiency and appropriateness of audit evidence
obtained in the light of the circumstances, for example, in the case where
fraud risk factors exist and a single document, of a nature that is susceptible to
fraud, is the sole supporting evidence for a material financial statement
amount.
A21. The auditor may accept records and documents as genuine unless the
auditor has reason to believe the contrary. Nevertheless, the auditor is
required to consider the reliability of information to be used as audit
evidence. In cases of doubt about the reliability of information or indications
of possible fraud (for example, if conditions identified during the audit cause
the auditor to believe that a document may not be authentic or that terms in
a document may have been falsified), the ISAs require that the auditor
investigate further and determine what modifications or additions to audit
procedures are necessary to resolve the matter.
A22. The auditor cannot be expected to disregard past experience of the
honesty and integrity of the entity’s management and those charged with
governance. Nevertheless, a
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