Deck 18: Audit and Assurance Services

Question 1

Compare and contrast an audit, a review and an agreed-upon procedures engagement.

Answer 1

In an audit (sometimes referred to as an examination), an auditor expresses positive assurance about an assertion being examined, that is, the assertion is presented in accordance with established criteria (i.e., GAAP) in all material respects. A review (sometimes referred to as a moderate assurance engagement) provides less assurance than an examination because the auditor only expresses negative assurance about the information, that is, the public accountant is not aware of any reasons to conclude the financial statements are not in conformity with established criteria (i.e., GAAP). Finally, an agreed-upon procedures engagement involves issuing a report on specific findings obtained by performing specific procedures agreed to by all parties prior to the start of the engagement.

Question 2

Explain compliance audits.

Answer 2

Because most organizations are confronted with a vast sea of laws, rules, and regulations with which they must comply and management often lacks the expertise to assess compliance in all relevant areas, the company's public accountants may be hired to assist in determining compliance. In a compliance audit, public accountants are hired to determine whether an organization has complied with specified laws, rules, regulations, or contractual provisions. The focus of a compliance audit may be on past compliance with a specified set of rules, or it may focus on the general effectiveness of the organization's internal controls that foster compliance.

Question 3

What is operational auditing?

Answer 3

Operational auditing is often referred to as management auditing or performance auditing in the private sector, and as comprehensive auditing, value-for-money auditing, systems auditing, or efficiency auditing in the public sector. Operational auditing examines the general effectiveness and efficiency of processes in an organization. There is a great deal of diversity in the subject matter of these audits. Operational audits can focus on either activities within an organization (e.g., payroll processing or plant maintenance) or separately identifiable divisions or locations (e.g., a branch office or manufacturing plant). An operational audit requires clear criteria for assessing efficiency and effectiveness. Because every engagement is unique, the criteria must be developed for each situation, usually in consultation with client personnel.

Question 4

What are three forms of assurance engagements that are closely related to financial statements?

Question 5

You have been hired for an enterprise risk management engagement. The client, a manufacturer, desires an assessment of the risk of supply chain disruption. What should your assurance assess?

Question 6

What two skills that public accountants possess are most critical to assurance services? Why?

Question 7

Under what circumstances may a public accountant render an opinion on financial statements which consist of projected future financial results?

Question 8

You have been hired to perform a compilation. What is a compilation of financial statements engagement? Is it an assurance engagement? What standards apply to compilation?

Question 9

You have been assigned to work on an operational audit. What measures of effectiveness and efficiency might be used?

Question 10

You have been asked to provide assurance services to a client. What is an assurance engagement? What conditions should exist before you agree to undertake this engagement?

Question 11

What is confidentiality? What are the trust service criteria for confidentiality?

Question 12

What is the important and controversial issue that related to compilations?

Question 13

What is an attestation? What distinguishes an attest engagement from other assurance services?

Question 14

What is the key difference between an audit or review and an agreed-upon procedures engagement? What conditions and requirements must be met in order for an independent public accountant to undertake an agreed-upon procedures engagement?

Question 15

Explain the three forms of attestation.

Question 16

You have been hired to provide trust services in evaluating the information systems of a client. On what principles will you base your evaluation?

Question 17

Under what conditions may a public accountant provide assurance about compliance?

Question 18

Why are accounting firms precluded from offered outsourcing services to SEC-registered audit clients?

Question 19

What is privacy? How can you, as a public accountant, help an organization address privacy issues?

Question 20

You are evaluating a client's privacy issues. What components of privacy should you address?