Fundamental Principles of Assurance Services

Practice flashcards covering the fundamental principles, elements, and types of assurance and non-assurance services based on Chapter 1 of the lecture notes.

What is the general concept of assurance?

Assurance refers to the practitioner's satisfaction as to the reliability of an assertion being made by one party for use by another party.

How is an assurance engagement defined?

An engagement in which a practitioner expresses 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.

What are the five elements of an assurance engagement (3SECC)?

A. A three-party relationship; B. An appropriate Subject matter; C. Suitable Criteria; D. Sufficient appropriate Evidence; E. A written assurance report (Conclusion).

Who are the three parties in an assurance relationship?

The practitioner, the responsible party, and the intended users.

Distinguish between a professional accountant, a practitioner, and an auditor.

A professional accountant is a CPA in any scope of practice; a practitioner is a CPA rendering professional services (assurance or non-assurance); and an auditor is a practitioner rendering audit and review services.

What is the difference between subject matter and subject matter information?

Subject matter is the nature of the assertion for which the practitioner gathers evidence, while subject matter information is the outcome of the evaluation or measurement of the subject matter against criteria.

What acronym represents the characteristics of suitable criteria?

RUN CR: Reliability, Understandability, Neutrality, Completeness, and Relevance.

How are sufficiency and appropriateness of evidence defined?

Sufficiency is the measure of the quantity of evidence, while appropriateness is the measure of the quality of evidence (its relevance and reliability).

What are the three components of assurance engagement risk?

Inherent risk, Control risk, and Detection risk.

What is defined as an attitude involving a questioning mind and a critical assessment of audit evidence?

Professional skepticism.

In terms of evidence reliability, what is the generalization regarding the source of information?

Evidence is more reliable when it is obtained from independent sources outside the entity compared to internal sources.

What are the levels and forms of assurance for a 'Reasonable Assurance Engagement'?

The level of assurance is high but not absolute, and the form of expression is positive.

What are the levels and forms of assurance for a 'Limited Assurance Engagement'?

The level of assurance is moderate (limited), and the form of expression is negative.

What is an attestation engagement?

An engagement in which a practitioner is engaged to issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party.

What is a direct engagement?

An assurance engagement where the practitioner either directly performs the evaluation or measurement of the subject matter or obtains a representation from the responsible party that is not available to the intended users.

What are some common examples of non-assurance engagements?

Agreed-upon procedures, compilation of financial information, some tax services where no conclusion is expressed, and management consulting.

What global organization for the accountancy profession was founded in 1977?

International Federation of Accountants (IFAC).

Which four independent standard-setting boards are supported by the IFAC?

1. IAASB (Auditing and Assurance); 2. IAESB (Accounting Education); 3. IESBA (Ethics); 4. IPSASB (Public Sector Accounting).

What body issues the Philippine Standards on Auditing (PSAs)?

The Auditing and Assurance Standards Council (AASC).

What is the primary purpose of the Philippine Framework for Assurance Engagements?

It serves as the foundation of concepts and a frame of reference for practitioners, but it is not an engagement standard and does not provide procedural requirements.