INTRODUCTION
Assurance engagement (ISAE 3000) previously ISAE 100. An assurance engagement is an
engagement in which a practitioner expresses a conclusion designed to enhance the degree of
confidence of the intended user other than the responsible party about the outcome of the
evaluation or measurement of the subject matter against criteria. It can be well spotted that an
assurance engagement consists of a 3 party relationship; an appropriate subject matter, suitable
criteria, sufficient appropriate evidence and written assurance report in the form appropriate to
assurance engagement.
Assurance services have a great ability of bettering the decision made by the users of
information. Assurance engagement are basically classified into two; the type and the level of
assurance provided. The table below summarizes the classifications.
Type
Level
Attestation
Reasonable
Direct
Limited
Classification by level of assurance
Reasonable assurance is one in which a high but not absolute level of assurance is given, while a
limited assurance is one in which a lower level of assurance is given as it allows for a lesser
amount of testing and evaluation and results in a negative expression.
Classification by type of assurance
Attestation and direct engagements are two types of assurance engagements which can be
applied to reviews.
REVIEW ENGAGEMNT
A review engagement is also known as a limited assurance engagement. It is conducted to
provide limited assurance that there are no material modifications that should be made to the
financial statements for them to be in conformity/accordance with the financial reporting
framework, on the basis of procedures which do not provide all the evidence that would be
required in an audit.
ATTESTATION ENGAGEMENT
In the past few years, attestation engagements have grown in popularity as the need for an
independent party to provide assurance over topics other than financial statements has become
required by laws, regulations or service clients.
An attestation engagement is an engagement with a client where an independent third party
investigates and reports on the subject matter created by a client. The resulting report gives users
a higher level of confidence regarding the subject of the engagement.
The practitioner examines, reviews and applies agreed upon procedures to the subject matter or
on assertions, where the subject matter is not the responsibility of the practitioner. Examples
include; reporting on how well the internal controls in clients process are functioning and
reporting on financial projections made by a client.
DIRECT ENGAGEMENT
A direct engagement is an assurance engagement in which the practitioner evaluates the
underlying subject matter against applicable criteria and aims to obtain sufficient appropriate
evidence to express, in a written direct assurance report, a conclusion to the intended users other
than the responsible party, about the outcome of the evaluation. An example of this type of
engagement is due diligence.
CONSULTATION SERVICES
Consulting engagements/services are “advisory” and related to client service activities, the nature
and scope of which is agreed with the client and which are intended to add value and improve an
organizations governance, risk management and control processes without the internal auditors
assuming management responsibility, for example council, advice, facilitation and training.
Consultation services are not considered as assurance services. Assurance services are designed
to test the validity of past date of business cycles. Consultation does not conform to the
definition of an assurance engagement where the practitioner expresses a conclusion about the
outcome of the evaluation or measurement of the subject matter against the criteria.
CONCLUSION
All in all, assurance engagements are one of the wide range of professional services offered by
auditors. Assurance engagements can be classified into attestation engagements and direct
engagements which are applicable to review engagements. Furthermore, auditors can as well
offer consulting services which as clearly discussed are not considered as assurance
engagements.
REFERENCES
ACCA (March to June 2018). ACCA PAPER P7: Advanced Auditing and Assurance
international. Study text: BPP learning Media. UK
Alvin. A. Ahrens, (et al) Auditing and Assurance services 16th edition, Michigan state
university, 2017.
International Standards on Auditing
Messier Glover and Prawitt, Auditing and Assurance Services, McGraw-Hill, 2005