Chapter 1: Introduction and overview of auditing
Auditing: a practical
approach 2 edition
Introduction and overview of audit and assurance
© John Wiley & Sons Australia, Ltd 2013
© John Wiley and Sons Australia, Ltd 2013
Solutions manual to accompany Auditing: a practical approach 2e
Chapter 1 – Introduction and overview of audit and
1.11 What does ‘assurance’ mean in the financial reporting context? Who are the
three parties relevant to an assurance engagement?
An assurance engagement (or service) is defined as ‘an engagement in which an
assurance 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’ (Framework for
Assurance Engagements, para. 8; International Framework for Assurance
Engagements, para. 7).
In the financial reporting context ‘assurance’ relates to the audit or review of an
entity’s financial report.
An audit provides reasonable assurance about the true and fair nature of the financial
reports, and a review provides limited assurance. The audit contains a positive
expression of opinion (e.g. ‘in our opinion the financial reports are in accordance with
(the Act) including giving a true and fair view…), while the review contains a
negative expression of opinion (e.g., ‘we have not become aware of any matter that
makes us believe that…the financial reports are not in accordance with (the Act)...
including giving a true and fair view..’).
An auditor may also perform agreed upon procedures for a client, but these do not
provide any assurance. The client determines the nature, timing and extent of
procedures and no opinion is provided to a third-party user.
The assurance practitioner is an auditor working in public practice providing
assurance on financial...