Syllabus A1f

Assurance engagements are:

1. External Audits

   An Auditor states an opinion as to whether the financial statements Give a true and fair view.

   An Auditor examines financial statements prepared by a board of directors to express an opinion as to whether they comply with accounting standards.

2. Review engagements

   The auditor reviews the financial statements using less evidence than required by an audit

   The report will be to the body that commissioned the review e.g. Bank, Directors.

Assurance engagements will have:

• An engagement letter agreeing terms

• A decision on methods to gather and evaluate evidence to support a conclusion

• A type of report to be produced at the end of the engagement

There are two types of an External Audit:

• Statutory

• Non - Statutory

Statutory Audit

• This is when entities are required by law to have an audit

• All public and large companies are required to have one

• Other organisations such as Building Societies and certain charities must also

Non Statutory Audit

This is when there is no legal requirement. 

A small company for example may choose to be audited when not legally obliged.

Reasons to undertake a non statutory audit will include:

• Providing assurance to the owners over financial results

• Making accounts more acceptable to Tax authorities

• Making a sale of the business easier

• Providing assurance to those financing the business e.g. Banks

Types of Review engagements:

• Risk assessment reports

• Review of internal controls

• System reliability reports

• Value for money reviews

• Social and environmental reports

Remember they’re basically something that someone wants assurance over - so it might be you’re buying something and you want assurance you're paying a fair price

We would call this a value for money review