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Assurance Engagements

ASAE 3000

Assurance Engagements Other than Audits or Reviews of Historical Financial Information

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Approval Date: 30 May 2017

Operative Date This Assurance Engagements is operative for financial reporting periods commencing on or after 1 January 2018

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Approval Date: 30 May 2017

This ASAE deals with assurance engagements other than audits or reviews of historical financial information, which are dealt with in the Australian Auditing Standards and Auditing Standards on Review Engagements, respectively.

Preamble

Includes: Preface, Authority Statement, Conformity with International Standards on Auditing

Preface

Reasons for Issuing ASAE 3000

The AUASB issues Standard on Assurance Engagements ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information pursuant to the requirements of the legislative provisions explained below.

The AUASB is a Non-Corporate Government Entity established under section 227A of the Australian Securities and Investments Commission Act 2001, as amended (ASIC Act).  Under section 227B of the ASIC Act, the AUASB may formulate assurance standards for other purposes.

Main Features

This Standard on Assurance Engagements establishes requirements and provides application and other explanatory material regarding the assurance practitioner’s responsibilities for accepting, conducting and reporting on assurance engagements other than audits or reviews of historical financial information covered by Australian Auditing Standards or Auditing Standards on Review Engagements.

This Standard on Assurance Engagements represents the Australian equivalent of revised ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information and will replace the current ASAE 3000 issued by the AUASB in June 2014.

Authority Statement

The Auditing and Assurance Standards Board (AUASB) formulates this Standard on Assurance Engagements ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information, pursuant to section 227B of the Australian Securities and Investments Commission Act 2001.

This Standard on Assurance Engagements is to be read in conjunction with ASA 100 Preamble to AUASB Standards, which sets out the intentions of the AUASB on how the AUASB Standards are to be understood, interpreted and applied.

Conformity with International Standards on Auditing

This Standard on Assurance Engagements conforms with International Standard on Assurance Engagements  ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information, issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).

Paragraphs that have been added to this Standard on Assurance Engagements (and do not appear in the text of the equivalent ISAE 3000) are identified with the prefix “Aus”.

This Australian Standard contains differences from the reissued ISAE 3000, which have been made to reflect the requirements for Australian assurance engagements.  In particular, the following changes have been made:

  • Use of the term the “assurance practitioner” and the “lead assurance practitioner” in place of the “practitioner” and the “engagement partner” to accommodate a broad application of the AUASB standards to professionals from other disciplines in addition to professional accountants.
  • The equivalent requirements and related application and other explanatory material included in ISAE 3000 in respect of “relevant ethical requirements”, have been included in another Auditing Standard, ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements.  There is no international equivalent to ASA 102.

Compliance with this Standard on Assurance Engagements enables compliance with ISAE 3000

Application

Aus 0.1

This Standard on Assurance Engagements (ASAE) applies to assurance engagements other than audits or reviews of historical financial information.

Operative Date

Aus 0.2

This ASAE is operative for assurance engagements commencing on or after 1 January 2018.  Early adoption of this ASAE is permitted prior to this date.[*]

 

*_1

Where the standard is early adopted, the assurance practitioner indicates in the assurance report that they have conducted the assurance engagement in accordance with ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information (May 2017).

Introduction

Includes: Scope of this Standard on Assurance Engagements, Effective Date

1

This ASAE deals with assurance engagements other than audits or reviews of historical financial information, which are dealt with in the Australian Auditing Standards and Auditing Standards on Review Engagements, respectively.  (Ref: Para. A21–A22)

2

Assurance engagements include both attestation engagements, in which a party other than the assurance practitioner measures or evaluates the underlying subject matter against the criteria, and direct engagements, in which the assurance practitioner measures or evaluates the underlying subject matter against the criteria.  This ASAE contains requirements and application and other explanatory material specific to reasonable and limited assurance attestation engagements.  This ASAE may also be applied to reasonable and limited assurance direct engagements, adapted and supplemented as necessary in the engagement circumstances.

3

This ASAE is premised on the basis that:

  1. The members of the engagement team and the engagement quality control reviewer (for those engagements where one has been appointed) are subject to the relevant ethical requirements[#] related to assurance engagements; and (Ref: Para. A30–A33)
  2. The assurance practitioner who is performing the engagement is a member of a firm that is subject to ASQC 1,[1] regarding the firm’s responsibility for its system of quality control.

4

Quality control within firms that perform assurance engagements, and compliance with ethical principles, including independence requirements, are widely recognised as being in the public interest and an integral part of high‑quality assurance engagements.  Assurance practitioners in public practice will be familiar with such requirements.  If a competent assurance practitioner other than a member of a professional accounting body in public practice chooses to represent compliance with this or other ASAEs, it is important to recognise that this ASAE includes requirements that reflect the premise in the preceding paragraph.

Scope of this Standard on Assurance Engagements

5

This ASAE covers assurance engagements other than audits or reviews of historical financial information, as described in the Framework for Assurance Engagements (Assurance Framework).  Where a subject‑matter specific ASAE is relevant to the subject matter of a particular engagement, that ASAE applies in addition to this ASAE.  (Ref: Para. A21–A22)

6

Not all engagements performed by assurance practitioners are assurance engagements.  Other frequently performed engagements that are not assurance engagements, as defined by paragraph 12(a) of this ASAE (and therefore are not covered by the ASAEs) include:

  1. Engagements covered by Auditing Standards on Related Services (ASRS), such as agreed‑upon procedure and compilation engagements;[2]
  2. The preparation of tax returns where no assurance conclusion is expressed; and
  3. Consulting (or advisory) engagements, such as management and tax consulting.  (Ref: Para. A1)

7

An assurance engagement performed under the ASAEs may be part of a larger engagement.  In such circumstances, the ASAEs are relevant only to the assurance portion of the engagement.

8

The following engagements, which may be consistent with the description in paragraph 12(a) of this ASAE, are not considered assurance engagements in terms of the ASAEs:

  1. Engagements to testify in legal proceedings regarding accounting, auditing, taxation or other matters; and
  2. Engagements that include professional opinions, views or wording from which a user may derive some assurance, if all of the following apply:
    1. Those opinions, views or wording are merely incidental to the overall engagement;
    2. Any written report issued is expressly restricted for use by only the intended users specified in the report;
    3. Under a written understanding with the specified intended users, the engagement is not intended to be an assurance engagement; and
    4. The engagement is not represented as an assurance engagement in the assurance practitioner’s report.

Effective Date

9

[Deleted by the AUASB.  Refer Aus 0.2.]

#_1

Relevant ethical requirements are defined in ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements.

1

See Auditing Standard ASQC 1 Quality Control for Firms that Perform Audits and Reviews of Financial Reports and Other Financial Information, Other Assurance Engagements and Related Services Engagements.

2

See ASRS 4400 Agreed‑Upon Procedures Engagements to Report Factual Findings

Objective

10

In conducting an assurance engagement, the objectives of the assurance practitioner are:

  1. To obtain either reasonable assurance or limited assurance, as appropriate, about whether the subject matter information is free from material misstatement;
  2. To express a conclusion regarding the outcome of the measurement or evaluation of the underlying subject matter through a written report that conveys either a reasonable assurance or a limited assurance conclusion and describes the basis for the conclusion; (Ref: Para. A2) and
  3. To communicate further as required by this ASAE and any other relevant ASAEs.

11

In all cases when reasonable assurance or limited assurance, as appropriate, cannot be obtained and a qualified conclusion in the assurance practitioner’s assurance report is insufficient in the circumstances for purposes of reporting to the intended users, this ASAE requires that the assurance practitioner disclaim a conclusion or withdraw (or resign) from the engagement, where withdrawal is possible under applicable law or regulation.

Definitions

12

For purposes of this ASAE and other ASAEs, unless indicated to the contrary, the following terms have the meanings attributed below. (Ref: Para. A27)

12(a)

Assurance engagement―An engagement in which an assurance practitioner aims to obtain sufficient appropriate evidence in order to express a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the subject matter information (that is, the outcome of the measurement or evaluation of an underlying subject matter against criteria).  Each assurance engagement is classified on two dimensions: (Ref: Para. A3

  1. Either a reasonable assurance engagement or a limited assurance engagement:
    1. Reasonable assurance engagement―An assurance engagement in which the assurance practitioner reduces engagement risk to an acceptably low level in the circumstances of the engagement as the basis for the assurance practitioner’s conclusion.  The assurance practitioner’s conclusion is expressed in a form that conveys the assurance practitioner’s opinion on the outcome of the measurement or evaluation of the underlying subject matter against criteria. 
    2. Limited assurance engagement―An assurance engagement in which the assurance practitioner reduces engagement risk to a level that is acceptable in the circumstances of the engagement but where that risk is greater than for a reasonable assurance engagement as the basis for expressing a conclusion in a form that conveys whether, based on the procedures performed and evidence obtained, a matter(s) has come to the assurance practitioner’s attention to cause the assurance practitioner to believe the subject matter information is materially misstated.  The nature, timing, and extent of procedures performed in a limited assurance engagement is limited compared with that necessary in a reasonable assurance engagement but is planned to obtain a level of assurance that is, in the assurance practitioner’s professional judgement, meaningful.  To be meaningful, the level of assurance obtained by the assurance practitioner is likely to enhance the intended users’ confidence about the subject matter information to a degree that is clearly more than inconsequential.  (Ref: Para. A3–A7)
  2. Either an attestation engagement or a direct engagement: (Ref: Para. A8)
    1. Attestation engagement―An assurance engagement in which a party other than the assurance practitioner measures or evaluates the underlying subject matter against the criteria.  A party other than the assurance practitioner also often presents the resulting subject matter information in a report or statement.  In some cases, however, the subject matter information may be presented by the assurance practitioner in the assurance report.  In an attestation engagement, the assurance practitioner’s conclusion addresses whether the subject matter information is free from material misstatement.  The assurance practitioner’s conclusion may be phrased in terms of: (Ref: Para. A179, A181)
      1. The underlying subject matter and the applicable criteria;
      2. The subject matter information and the applicable criteria; or
      3. A statement made by the appropriate party.
    2. Direct engagement―An assurance engagement in which the assurance practitioner measures or evaluates the underlying subject matter against the applicable criteria and the assurance practitioner presents the resulting subject matter information as part of, or accompanying, the assurance report. In a direct engagement, the assurance practitioner’s conclusion addresses the reported outcome of the measurement or evaluation of the underlying subject matter against the criteria.

Aus 12.1

Assurance practitioner―The individual, firm, or other organisation, whether in public practice, industry and commerce, or the public sector conducting an assurance engagement. Where this ASAE expressly intends that a requirement or responsibility be fulfilled by the lead assurance practitioner, the term the “lead assurance practitioner” rather than the “assurance practitioner” is used. (Ref: Para. A37)

Aus 12.2

Assurance practitioner’s expert―An individual or organisation possessing expertise in a field other than assurance, whose work in that field is used by the assurance practitioner to assist the assurance practitioner in obtaining sufficient appropriate evidence. An assurance practitioner’s expert may be either an assurance practitioner’s internal expert (who is a partner or staff, including temporary staff, of the assurance practitioner’s firm or a network firm), or an assurance practitioner’s external expert.

12(b)

Assurance skills and techniques―Those planning, evidence gathering, evidence evaluation, communication and reporting skills and techniques demonstrated by an assurance practitioner that are distinct from expertise in the underlying subject matter of any particular assurance engagement or its measurement or evaluation. (Ref: Para. A9)

12(c)

Criteria―The benchmarks used to measure or evaluate the underlying subject matter. The “applicable criteria” are the criteria used for the particular engagement. (Ref: Para. A10)

12(d)

Engagement circumstances―The broad context defining the particular engagement, which includes: the terms of the engagement; whether it is a reasonable assurance engagement or a limited assurance engagement, the characteristics of the underlying subject matter; the measurement or evaluation criteria; the information needs of the intended users; relevant characteristics of the responsible party, the measurer or evaluator, and the engaging party and their environment; and other matters, for example events, transactions, conditions and practices, that may have a significant effect on the engagement.

12(e)

[Deleted by the AUASB. Refer Aus 12.3.]

12(f)

Engagement risk―The risk that the assurance practitioner expresses an inappropriate conclusion when the subject matter information is materially misstated. (Ref: Para. A11–A14)

12(g)

Engaging party―The party(ies) that engages the assurance practitioner to perform the assurance engagement. (Ref: Para. A15)

12(h)

Engagement team―All assurance practitioners and staff performing the engagement, and any individuals engaged by the firm or a network firm who perform procedures on the engagement. This excludes an assurance practitioner’s external expert engaged by the firm or a network firm.

12(i)

Evidence―Information used by the assurance practitioner in arriving at the assurance practitioner’s conclusion. Evidence includes both information contained in relevant information systems, if any, and other information. For purposes of the ASAEs: (Ref: Para. A147–A155)

  1. Sufficiency of evidence is the measure of the quantity of evidence.
  2. Appropriateness of evidence is the measure of the quality of evidence.

12(j)

Firm―A sole assurance practitioner, partnership or corporation or other entity of individual assurance practitioners. “Firm” should be read as referring to its public sector equivalents where relevant.

12(k)

Historical financial information―Information expressed in financial terms in relation to a particular entity, derived primarily from that entity’s accounting system, about economic events occurring in past time periods or about economic conditions or circumstances at points in time in the past.

12(l)

Internal audit function―A function of an entity that performs assurance and consulting activities designed to evaluate and improve the effectiveness of the entity’s governance, risk management and internal control processes.

12(m)

Intended users―The individual(s) or organisation(s), or group(s) thereof that the assurance practitioner expects will use the assurance report. In some cases, there may be intended users other than those to whom the assurance report is addressed. (Ref: Para. A16–A18, A37)

Aus 12.3

Lead assurance practitioner―The person in the firm who is responsible for the engagement and its performance, and for the assurance report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body. The “lead assurance practitioner” should be read as referring to its public sector equivalents where relevant.

12(n)

Measurer or evaluator―The party(ies) who measures or evaluates the underlying subject matter against the criteria. The measurer or evaluator possesses expertise in the underlying subject matter. (Ref: Para. A37, A39)

12(o)

Misstatement―A difference between the subject matter information and the appropriate measurement or evaluation of the underlying subject matter in accordance with the criteria. Misstatements can be intentional or unintentional, qualitative or quantitative, and include omissions.

12(p)

Misstatement of fact (with respect to other information)―Other information that is unrelated to matters appearing in the subject matter information or the assurance report that is incorrectly stated or presented. A material misstatement of fact may undermine the credibility of the document containing the subject matter information.

12(q)

Other information―Information (other than the subject matter information and the assurance report thereon) which is included, either by law, regulation or custom, in a document containing the subject matter information and the assurance report thereon.

12(r)

[Deleted by the AUASB. Refer Aus 12.1.]

12(s)

[Deleted by the AUASB. Refer Aus 12.2.]

12(t)

Professional judgement―The application of relevant training, knowledge and experience, within the context provided by assurance and ethical standards, in making informed decisions about the courses of action that are appropriate in the circumstances of the engagement.

12(u)

Professional scepticism―An attitude that includes a questioning mind, being alert to conditions which may indicate possible misstatement, and a critical assessment of evidence.

12(v)

Responsible party―The party(ies) responsible for the underlying subject matter. (Ref: Para. A37)

12(w)

Risk of material misstatement―The risk that the subject matter information is materially misstated prior to the engagement.

12(x)

Subject matter information―The outcome of the measurement or evaluation of the underlying subject matter against the criteria, i.e., the information that results from applying the criteria to the underlying subject matter. (Ref: Para. A19)

12(y)

Underlying subject matter―The phenomenon that is measured or evaluated by applying criteria.

13

For the purposes of this ASAE and other ASAEs, references to “appropriate party(ies)” should be read hereafter as “the responsible party, the measurer or evaluator, or the engaging party, as appropriate.” (Ref: Para. A20, A37)

Requirements

Includes: Conduct of an Assurance Engagement in Accordance with ASAEs, Ethical Requirements , Acceptance and Continuance, Quality Control , Professional Scepticism, Professional Judgement, and Assurance Skills and Techniques , Planning and Performing the Engagement, Obtaining Evidence, Subsequent Events, Other Information , Description of Applicable Criteria, Forming the Assurance Conclusion , Preparing the Assurance Report, Unmodified and Modified Conclusions, Other Communication Responsibilities, Documentation

Conduct of an Assurance Engagement in Accordance with ASAEs

Complying with Standards that are Relevant to the Engagement

14

The assurance practitioner shall comply with this ASAE and any subject matter‑specific ASAEs relevant to the engagement.

15

The assurance practitioner shall not represent compliance with this or any other ASAE unless the assurance practitioner has complied with the requirements of this ASAE and any other ASAE relevant to the engagement.  (Ref: Para. A21–A22A171)

Text of an ASAE

16

The assurance practitioner shall have an understanding of the entire text of an ASAE, including its application and other explanatory material, to understand its objectives and to apply its requirements properly.  (Ref: Para. A23–A28)

Complying with Relevant Requirements

17

Subject to the following paragraph, the assurance practitioner shall comply with each requirement of this ASAE and of any relevant subject matter‑specific ASAE unless, in the circumstances of the engagement the requirement is not relevant because it is conditional and the condition does not exist.  Requirements that apply to only limited assurance or reasonable assurance engagements have been presented in a columnar format with the letter “L” (limited assurance) or “R” (reasonable assurance) after the paragraph number.  (Ref: Para. A29)

18

In exceptional circumstances, the assurance practitioner may judge it necessary to depart from a relevant requirement in an ASAE.  In such circumstances, the assurance practitioner shall perform alternative procedures to achieve the aim of that requirement.  The need for the assurance practitioner to depart from a relevant requirement is expected to arise only where the requirement is for a specific procedure to be performed and, in the specific circumstances of the engagement, that procedure would be ineffective in achieving the aim of the requirement.

Failure to Achieve an Objective

19

If an objective in this ASAE or a relevant subject matter‑specific ASAE cannot be achieved, the assurance practitioner shall evaluate whether this requires the assurance practitioner to modify the assurance practitioner’s conclusion or withdraw from the engagement (where withdrawal is possible under applicable law or regulation).  Failure to achieve an objective in a relevant ASAE represents a significant matter requiring documentation in accordance with paragraph 79 of this ASAE.

Ethical Requirements

20

[Deleted by the AUASB.  Refer Aus 20.1.]

Aus 20.1

The assurance practitioner shall comply with the relevant ethical requirements[*] related to assurance engagements.  (Ref. Para.A30‑A34A60).

Acceptance and Continuance

21

The lead assurance practitioner shall be satisfied that appropriate procedures regarding the acceptance and continuance of client relationships and assurance engagements have been followed by the firm, and shall determine that conclusions reached in this regard are appropriate.

22

The assurance practitioner shall accept or continue an assurance engagement only when: (Ref: Para. A30–A34)

  1. The assurance practitioner has no reason to believe that relevant ethical requirements, including independence, will not be satisfied;
  2. The assurance practitioner is satisfied that those persons who are to perform the engagement collectively have the appropriate competence and capabilities (see also paragraph 32 of this ASAE); and
  3. The basis upon which the engagement is to be performed has been agreed, through:
    1. Establishing that the preconditions for an assurance engagement are present (see also paragraphs 24–25 of this ASAE); and
    2. Confirming that there is a common understanding between the assurance practitioner and the engaging party of the terms of the engagement, including the assurance practitioner’s reporting responsibilities.

23

If the lead assurance practitioner obtains information that would have caused the firm to decline the engagement had that information been available earlier, the lead assurance practitioner shall communicate that information promptly to the firm, so that the firm and the lead assurance practitioner can take the necessary action.

Preconditions for the Assurance Engagement

24

In order to establish whether the preconditions for an assurance engagement are present, the assurance practitioner shall, on the basis of a preliminary knowledge of the engagement circumstances and discussion with the appropriate party(ies), determine whether: (Ref: Para. A35–A36)

  1. The roles and responsibilities of the appropriate parties are suitable in the circumstances; and (Ref: Para. A37–A39)
  2. The engagement exhibits all of the following characteristics:
    1. The underlying subject matter is appropriate; (Ref: Para. A40–A44)
    2. The criteria that the assurance practitioner expects to be applied in the preparation of the subject matter information are suitable for the engagement circumstances, including that they exhibit the following characteristics: (Ref: Para. A45–A50)
      1. Relevance.
      2. Completeness.
      3. Reliability.
      4. Neutrality.
      5. Understandability.
    3. The criteria that the assurance practitioner expects to be applied in the preparation of the subject matter information will be available to the intended users.  (Ref: Para. A51–A52)
    4. The assurance practitioner expects to be able to obtain the evidence needed to support the assurance practitioner’s conclusion; (Ref: Para. A53–A55)
    5. The assurance practitioner’s conclusion, in the form appropriate to either a reasonable assurance engagement or a limited assurance engagement, is to be contained in a written report; and
    6. A rational purpose including, in the case of a limited assurance engagement, that the assurance practitioner expects to be able to obtain a meaningful level of assurance.  (Ref: Para. A56)

25

If the preconditions for an assurance engagement are not present, the assurance practitioner shall discuss the matter with the engaging party.  If changes cannot be made to meet the preconditions, the assurance practitioner shall not accept the engagement as an assurance engagement unless required by law or regulation to do so.  However, an engagement conducted under such circumstances does not comply with ASAEs.  Accordingly, the assurance practitioner shall not include any reference within the assurance report to the engagement having been conducted in accordance with this ASAE or any other ASAE(s).

Limitation on Scope Prior to Acceptance of the Engagement

26

If the engaging party imposes a limitation on the scope of the assurance practitioner’s work in the terms of a proposed assurance engagement such that the assurance practitioner believes the limitation will result in the assurance practitioner disclaiming a conclusion on the subject matter information, the assurance practitioner shall not accept such an engagement as an assurance engagement, unless required by law or regulation to do so.  (Ref: Para. A156(c))

Agreeing on the Terms of the Engagement

27

The assurance practitioner shall agree the terms of the engagement with the engaging party.  The agreed terms of the engagement shall be specified in sufficient detail in an engagement letter or other suitable form of written agreement, written confirmation, or in law or regulation.  (Ref: Para. A57–A58)

28

On recurring engagements, the assurance practitioner shall assess whether circumstances require the terms of the engagement to be revised and whether there is a need to remind the engaging party of the existing terms of the engagement.

Acceptance of a Change in the Terms of the Engagement

29

The assurance practitioner shall not agree to a change in the terms of the engagement where there is no reasonable justification for doing so.  If such a change is made, the assurance practitioner shall not disregard evidence that was obtained prior to the change.  (Ref: Para. A59)

Assurance Report Prescribed by Law or Regulation

30

Where, in some cases, law or regulation prescribe the layout or wording of the assurance report, the assurance practitioner shall evaluate:

  1. Whether intended users might misunderstand the assurance conclusion; and
  2. If so, whether additional explanation in the assurance report can mitigate possible misunderstanding.

If the assurance practitioner concludes that additional explanation in the assurance report cannot mitigate possible misunderstanding, the assurance practitioner shall not accept the engagement, unless required by law or regulation to do so.  An engagement conducted in accordance with such law or regulation does not comply with ASAEs.  Accordingly, the assurance practitioner shall not include any reference within the assurance report to the engagement having been conducted in accordance with this ASAE or any other ASAE(s) (see also paragraph 71 of this ASAE).

Quality Control

Characteristics of the Lead Assurance Practitioner

31

The lead assurance practitioner shall:

  1. Be a member of a firm that applies ASQC 1[*]; (Ref: Para. A60–A66)
  2. Have competence in assurance skills and techniques developed through extensive training and practical application; and (Ref: Para. A60)
  3. Have sufficient competence in the underlying subject matter and its measurement or evaluation to accept responsibility for the assurance conclusion.  (Ref: Para. A67–A68)

Assignment of the Team

32

The lead assurance practitioner shall: (Ref: Para. A69)

  1. Be satisfied that those persons who are to perform the engagement collectively have the appropriate competence and capabilities to: (Ref: Para. A70–A71)
    1. Perform the engagement in accordance with relevant standards and applicable legal and regulatory requirements; and
    2. Enable an assurance report that is appropriate in the circumstances to be issued.
  2. Be satisfied that the assurance practitioner will be able to be involved in the work of:
    1. An assurance practitioner’s expert where the work of that expert is to be used; and (Ref: Para. A70–A71)
    2. Another assurance practitioner, not part of the engagement team, where the assurance work of that assurance practitioner is to be used, (Ref: Para. A72–A73)
  3. to an extent that is sufficient to accept responsibility for the assurance conclusion on the subject matter information.

Responsibilities of the Lead Assurance Practitioner

33

The lead assurance practitioner shall take responsibility for the overall quality on the engagement.  This includes responsibility for:

  1. Appropriate procedures being performed regarding the acceptance and continuance of client relationships and engagements;
  2. The engagement being planned and performed (including appropriate direction and supervision) to comply with professional standards and applicable legal and regulatory requirements;
  3. Reviews being performed in accordance with the firm’s review policies and procedures, and reviewing the engagement documentation on or before the date of the assurance report; (Ref: Para. A74)
  4. Appropriate engagement documentation being maintained to provide evidence of achievement of the assurance practitioner’s objectives, and that the engagement was performed in accordance with relevant ASAEs and relevant legal and regulatory requirements; and
  5. Appropriate consultation being undertaken by the engagement team on difficult or contentious matters.

34

Throughout the engagement, the lead assurance practitioner shall remain alert, through observation and making enquiries as necessary, for evidence of non‑compliance with relevant ethical requirements by members of the engagement team.  If matters come to the lead assurance practitioner’s attention through the firm’s system of quality control or otherwise that indicate that members of the engagement team have not complied with relevant ethical requirements, the lead assurance practitioner, in consultation with others in the firm, shall determine the appropriate action.

35

The lead assurance practitioner shall consider the results of the firm’s monitoring process as evidenced in the latest information circulated by the firm and, if applicable, other network firms and whether deficiencies noted in that information may affect the assurance engagement.

Engagement Quality Control Review

36

For those engagements, if any, for which a quality control review is required by law or regulation or for which the firm has determined that an engagement quality control review is required:

  1. The lead assurance practitioner shall take responsibility for discussing significant matters arising during the engagement with the engagement quality control reviewer, and not date the assurance report until completion of that review; and
  2. The engagement quality control reviewer shall perform an objective evaluation of the significant judgements made by the engagement team, and the conclusions reached in formulating the assurance report.  This evaluation shall involve: (Ref: Para. A75)
    1. Discussion of significant matters with the lead assurance practitioner;
    2. Review of the subject matter information and the proposed assurance report;
    3. Review of selected engagement documentation relating to the significant judgements the engagement team made and the conclusions it reached; and
    4. Evaluation of the conclusions reached in formulating the assurance report

Professional Scepticism, Professional Judgement, and Assurance Skills and Techniques

37

The assurance practitioner shall plan and perform an engagement with professional scepticism, recognising that circumstances may exist that cause the subject matter information to be materially misstated. (Ref: Para. A76–A80)

38

The assurance practitioner shall exercise professional judgement in planning and performing an assurance engagement, including determining the nature, timing and extent of procedures.  (Ref: Para. A81–A85)

39

The assurance practitioner shall apply assurance skills and techniques as part of an iterative, systematic engagement process.

Planning and Performing the Engagement

Planning

40

The assurance practitioner shall plan the engagement so that it will be performed in an effective manner, including setting the scope, timing and direction of the engagement, and determining the nature, timing and extent of planned procedures that are required to be carried out in order to achieve the objective of the assurance practitioner. (Ref: Para. A86–A89)

41

The assurance practitioner shall determine whether the criteria are suitable for the engagement circumstances, including that they exhibit the characteristics identified in paragraph 24(b)(ii) of this ASAE.

42

If it is discovered after the engagement has been accepted that one or more preconditions for an assurance engagement is not present, the assurance practitioner shall discuss the matter with the appropriate party(ies), and shall determine:

  1. Whether the matter can be resolved to the assurance practitioner’s satisfaction;
  2. Whether it is appropriate to continue with the engagement; and
  3. Whether and, if so, how to communicate the matter in the assurance report. 

43

If it is discovered after the engagement has been accepted that some or all of the applicable criteria are unsuitable or some or all of the underlying subject matter is not appropriate for an assurance engagement, the assurance practitioner shall consider withdrawing from the engagement, if withdrawal is possible under applicable law or regulation.  If the assurance practitioner continues with the engagement, the assurance practitioner shall express a qualified or adverse conclusion, or disclaimer of conclusion, as appropriate in the circumstances.  (Ref: Para. A90–A91)

Materiality

44

The assurance practitioner shall consider materiality when: (Ref: Para. A92–A100)  

  1. Planning and performing the assurance engagement, including when determining the nature, timing and extent of procedures; and
  2. Evaluating whether the subject matter information is free from material misstatement.

Understanding the Underlying Subject Matter and Other Engagement Circumstances

45

The assurance practitioner shall make enquiries of the appropriate party(ies) regarding:

  1. Whether they have knowledge of any actual, suspected or alleged intentional misstatement or non‑compliance with laws and regulations affecting the subject matter information; (Ref: Para. A101‑A102)
  2. Whether the responsible party has an internal audit function and, if so, make further enquiries to obtain an understanding of the activities and main findings of the internal audit function with respect to the subject matter information; and
  3. Whether the responsible party has used any experts in the preparation of the subject matter information.

46

Limited Assurance

Reasonable Assurance

L - The Assurance practitioner shall obtain an understanding of the underlying subject matter and other engagement circumstances sufficient to:

  1. Enable the assurance practitioner to identify areas where a material misstatement of the subject matter information is likely to arise; and
  2. Thereby, provide a basis for designing and performing procedures to address the areas identified in paragraph 46L(a) of this ASAE and to obtain limited assurance to support the assurance practitioner’s conclusion. (Ref: Para. A101–A105A108)

R - The assurance practitioner shall obtain an understanding of the underlying subject matter and other engagement circumstances sufficient to:

  1. Enable the assurance practitioner to identify and assess the risks of material misstatement in the subject matter information; and
  2. Thereby, provide a basis for designing and performing procedures to respond to the assessed risks and to obtain reasonable assurance to support the assurance practitioner’s conclusion. (Ref: Para. A101–A104A108)

 

47

Limited Assurance

Reasonable Assurance

L - In obtaining an understanding of the underlying subject matter and other engagement circumstances under paragraph 46L of this ASAE, the assurance practitioner shall consider the process used to prepare the subject matter information. (Ref: Para. A107)

R - In obtaining an understanding of the underlying subject matter and other engagement circumstances under paragraph 46R of this ASAE, the assurance practitioner shall obtain an understanding of internal control over the preparation of the subject matter information relevant to the engagement. This includes evaluating the design of those controls relevant to the engagement and determining whether they have been implemented by performing procedures in addition to enquiry of the personnel responsible for the subject matter information. (Ref: Para. A106)

 

Obtaining Evidence

Risk Consideration and Responses to Risks

48

Limited Assurance

Reasonable Assurance

L - Based on the assurance practitioner’s understanding (see paragraph 46L of this ASAE), the assurance practitioner shall: (Ref: Para. A109–A113)

  1. Identify areas where a material misstatement of the subject matter information is likely to arise;
  2. Design and perform procedures to address the areas identified in paragraph 48L(a) of this ASAE and to obtain limited assurance to support the assurance practitioner’s conclusion.

R - Based on the assurance practitioner’s understanding (see paragraph 46R of this ASAE) the assurance practitioner shall: (Ref: Para. A108–A110)

  1. Identify and assess the risks of material misstatement in the subject matter information; and
  2. Design and perform procedures to respond to the assessed risks and to obtain reasonable assurance to support the assurance practitioner’s conclusion. In addition to any other procedures on the subject matter information that are appropriate in the engagement circumstances, the assurance practitioner’s procedures shall include obtaining sufficient appropriate evidence as to the operating effectiveness of relevant controls over the subject matter information when:
    1. The assurance practitioner’s assessment of the risks of material misstatement includes an expectation that controls are operating effectively, or
    2. Procedures other than testing of controls cannot alone provide sufficient appropriate evidence.

 

49

Limited Assurance

Reasonable Assurance

Determining Whether Additional Procedures Are Necessary in a Limited Assurance Engagement

L - If the assurance practitioner becomes aware of a matter(s) that causes the assurance practitioner to believe that the subject matter information may be materially misstated, the assurance practitioner shall design and perform additional procedures to obtain further evidence until the assurance practitioner is able to: (Ref: Para. A113–A118)

  1. Conclude that the matter is not likely to cause the subject matter information to be materially misstated; or
  2. Determine that the matter(s) causes the subject matter information to be materially misstated.

Revision of Risk Assessment in a Reasonable Assurance Engagement

R - The assurance practitioner’s assessment of the risks of material misstatement in the subject matter information may change during the course of the engagement as additional evidence is obtained. In circumstances where the assurance practitioner obtains evidence which is inconsistent with the evidence on which the assurance practitioner originally based the assessment of the risks of material misstatement, the assurance practitioner shall revise the assessment and modify the planned procedures accordingly. (Ref: Para. A113)

 

50

When designing and performing procedures, the assurance practitioner shall consider the relevance and reliability of the information to be used as evidence.  If:

  1. Evidence obtained from one source is inconsistent with that obtained from another; or
  2. The assurance practitioner has doubts about the reliability of information to be used as evidence,

the assurance practitioner shall determine what changes or additions to procedures are necessary to resolve the matter, and shall consider the effect of the matter, if any, on other aspects of the engagement.

51

The assurance practitioner shall accumulate uncorrected misstatements identified during the engagement other than those that are clearly trivial.  (Ref: Para. A119–A120)

Work Performed by an Assurance Practitioner’s Expert

52

When the work of an assurance practitioner’s expert is to be used, the assurance practitioner shall also: (Ref: Para. A121–A125)

  1. Evaluate whether the assurance practitioner’s expert has the necessary competence, capabilities and objectivity for the assurance practitioner’s purposes.  In the case of an assurance practitioner’s external expert, the evaluation of objectivity shall include enquiry regarding interests and relationships that may create a threat to that expert’s objectivity; (Ref: Para. A126–A129)
  2. Obtain a sufficient understanding of the field of expertise of the assurance practitioner’s expert; (Ref: Para. A130–A131)
  3. Agree with the assurance practitioner’s expert on the nature, scope and objectives of that expert’s work; and (Ref: Para. A132–A133)
  4. Evaluate the adequacy of the assurance practitioner’s expert’s work for the assurance practitioner’s purposes.  (Ref: Para. A134–A135)

Work Performed by Another Assurance Practitioner, a Responsible Party’s or Measurer’s or Evaluator’s Expert, or an Internal Auditor (Ref: Para. A136)

53

When the work of another assurance practitioner is to be used, the assurance practitioner shall evaluate whether that work is adequate for the assurance practitioner’s purposes. 

54

If information to be used as evidence has been prepared using the work of a responsible party’s or a measurer’s or evaluator’s expert, the assurance practitioner shall, to the extent necessary having regard to the significance of that expert’s work for the assurance practitioner’s purposes:

  1. Evaluate the competence, capabilities and objectivity of that expert;
  2. Obtain an understanding of the work of that expert; and
  3. Evaluate the appropriateness of that expert’s work as evidence.

55

If the assurance practitioner plans to use the work of the internal audit function, the assurance practitioner shall evaluate the following:

  1. The extent to which the internal audit function’s organisational status and relevant policies and procedures support the objectivity of the internal auditors;
  2. The level of competence of the internal audit function;
  3. Whether the internal audit function applies a systematic and disciplined approach, including quality control; and
  4. Whether the work of the internal audit function is adequate for the purposes of the engagement.

Written Representations

56

The assurance practitioner shall request from the appropriate party(ies) a written representation:

  1. That it has provided the assurance practitioner with all information of which the appropriate party(ies) is aware that is relevant to the engagement.  (Ref: Para. A54–A55 and A137–A139)
  2. Confirming the measurement or evaluation of the underlying subject matter against the applicable criteria, including that all relevant matters are reflected in the subject matter information.

57

If, in addition to required representations, the assurance practitioner determines that it is necessary to obtain one or more written representations to support other evidence relevant to the subject matter information, the assurance practitioner shall request such other written representations.

58

When written representations relate to matters that are material to the subject matter information, the assurance practitioner shall:

  1. Evaluate their reasonableness and consistency with other evidence obtained, including other representations (oral or written); and
  2. Consider whether those making the representations can be expected to be well‑informed on the particular matters.

59

The date of the written representations shall be as near as practicable to, but not after, the date of the assurance report.

Requested Written Representations Not Provided or Not Reliable

60

If one or more of the requested written representations are not provided or the assurance practitioner concludes that there is sufficient doubt about the competence, integrity, ethical values, or diligence of those providing the written representations, or that the written representations are otherwise not reliable, the assurance practitioner shall: (Ref: Para. A140)

  1. Discuss the matter with the appropriate party(ies);
  2. Re‑evaluate the integrity of those from whom the representations were requested or received and evaluate the effect that this may have on the reliability of representations (oral or written) and evidence in general; and
  3. Take appropriate actions, including determining the possible effect on the conclusion in the assurance report.

Subsequent Events

61

When relevant to the engagement, the assurance practitioner shall consider the effect on the subject matter information and on the assurance report of events up to the date of the assurance report, and shall respond appropriately to facts that become known to the assurance practitioner after the date of the assurance report, that, had they been known to the assurance practitioner at that date, may have caused the assurance practitioner to amend the assurance report.  The extent of consideration of subsequent events depends on the potential for such events to affect the subject matter information and to affect the appropriateness of the assurance practitioner’s conclusion.  However, the assurance practitioner has no responsibility to perform any procedures regarding the subject matter information after the date of the assurance report.  (Ref: Para. A141–A142)

Other Information

62

When documents containing the subject matter information and the assurance report thereon include other information, the assurance practitioner shall read that other information to identify material inconsistencies, if any, with the subject matter information or the assurance report and, if on reading that other information, the assurance practitioner: (Ref: Para. A143)

  1. Identifies a material inconsistency between that other information and the subject matter information or the assurance report; or
  2. Becomes aware of a material misstatement of fact in that other information that is unrelated to matters appearing in the subject matter information or the assurance report,

the assurance practitioner shall discuss the matter with the appropriate party(ies) and take further action as appropriate.

Description of Applicable Criteria

63

The assurance practitioner shall evaluate whether the subject matter information adequately refers to or describes the applicable criteria.  (Ref: Para. A144–A146)

Forming the Assurance Conclusion

64

The assurance practitioner shall evaluate the sufficiency and appropriateness of the evidence obtained in the context of the engagement and, if necessary in the circumstances, attempt to obtain further evidence.  The assurance practitioner shall consider all relevant evidence, regardless of whether it appears to corroborate or to contradict the measurement or evaluation of the underlying subject matter against the applicable criteria.  If the assurance practitioner is unable to obtain necessary further evidence, the assurance practitioner shall consider the implications for the assurance practitioner’s conclusion in paragraph 65 of this ASAE.  (Ref: Para. A147–A153)

65

The assurance practitioner shall form a conclusion about whether the subject matter information is free of material misstatement.  In forming that conclusion, the assurance practitioner shall consider the assurance practitioner’s conclusion in paragraph 64 of this ASAE regarding the sufficiency and appropriateness of evidence obtained and an evaluation of whether uncorrected misstatements are material, individually or in the aggregate.  (Ref: Para. A2 and A154–A155)

66

If the assurance practitioner is unable to obtain sufficient appropriate evidence, a scope limitation exists and the assurance practitioner shall express a qualified conclusion, disclaim a conclusion, or withdraw from the engagement, where withdrawal is possible under applicable law or regulation, as appropriate.  (Ref: Para. A156–A158)

Preparing the Assurance Report

67

The assurance report shall be in writing and shall contain a clear expression of the assurance practitioner’s conclusion about the subject matter information. (Ref: Para. A2, A159–A161)

68

The assurance practitioner’s conclusion shall be clearly separated from information or explanations that are not intended to affect the assurance practitioner’s conclusion, including any Emphasis of Matter, Other Matter, findings related to particular aspects of the engagements, recommendations or additional information included in the assurance report.  The wording used shall make it clear that an Emphasis of Matter, Other Matter, findings, recommendations or additional information is not intended to detract from the assurance practitioner’s conclusion. (Ref: Para. A159–A161)

Assurance Report Content

69

The assurance report shall include at a minimum the following basic elements:

  1. A title that clearly indicates the report is an independent assurance report.  (Ref: Para. A162)
  2. An addressee.  (Ref: Para. A163)
  3. An identification or description of the level of assurance obtained by the assurance practitioner, the subject matter information and, when appropriate, the underlying subject matter.  When the assurance practitioner’s conclusion is phrased in terms of a statement made by the appropriate party, that statement shall accompany the assurance report, be reproduced in the assurance report or be referenced therein to a source that is available to the intended users.  (Ref: Para A164)
  4. Identification of the applicable criteria.  (Ref: Para. A165)
  5. Where appropriate, a description of any significant inherent limitations associated with the measurement or evaluation of the underlying subject matter against the applicable criteria.  (Ref: Para. A166)
  6. When the applicable criteria are designed for a specific purpose, a statement alerting readers to this fact and that, as a result, the subject matter information may not be suitable for another purpose.  (Ref: Para. A167A168)
  7. A statement to identify the responsible party and the measurer or evaluator if different, and to describe their responsibilities and the assurance practitioner’s responsibilities.  (Ref: Para. A169)
  8. A statement that the engagement was performed in accordance with this ASAE or, where there is a subject‑matter specific ASAE, that ASAE.  (Ref: Para. A170A171)
  9. A statement that the firm of which the assurance practitioner is a member applies ASQC 1.  (Ref: Para. A172)
  10. A statement that the assurance practitioner complies with the independence and other relevant ethical requirements related to assurance engagements.  (Ref: Para. A173)
  11. An informative summary of the work performed as the basis for the assurance practitioner’s conclusion.  In the case of a limited assurance engagement, an appreciation of the nature, timing, and extent of procedures performed is essential to understanding the assurance practitioner’s conclusion.  In a limited assurance engagement, the summary of the work performed shall state that:
    1. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement; and
    2. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed.  (Ref: Para. A6, A174A178)
  12. The assurance practitioner’s conclusion: (Ref: Para. A2, A179A181)
    1. When appropriate, the conclusion shall inform the intended users of the context in which the assurance practitioner’s conclusion is to be read.  (Ref: Para. A180)
    2. In a reasonable assurance engagement, the conclusion shall be expressed in a positive form.  (Ref: Para. A179)
    3. In a limited assurance engagement, the conclusion shall be expressed in a form that conveys whether, based on the procedures performed and evidence obtained, a matter(s) has come to the assurance practitioner’s attention to cause the assurance practitioner to believe that the subject matter information is materially misstated.  (Ref: Para. A181)
    4. The conclusion in (ii) or (iii) shall be phrased using appropriate words for the underlying subject matter and applicable criteria given the engagement circumstances and shall be phrased in terms of: (Ref: Para. A182)
      1. The underlying subject matter and the applicable criteria;
      2. The subject matter information and the applicable criteria; or
      3. A statement made by the appropriate party.
    5. When the assurance practitioner expresses a modified conclusion, the assurance report shall contain:
      1. A section that provides a description of the matter(s) giving rise to the modification; and
      2. A section that contains the assurance practitioner’s modified conclusion.  (Ref: Para. A183)
  13. The assurance practitioner’s signature.  (Ref: Para. A184)
  14. The date of the assurance report.  The assurance report shall be dated no earlier than the date on which the assurance practitioner has obtained the evidence on which the assurance practitioner’s conclusion is based, including evidence that those with the recognised authority have asserted that they have taken responsibility for the subject matter information.  (Ref: Para. A185)
  15. The location in the jurisdiction where the assurance practitioner practices.

Reference to the Assurance Practitioner’s Expert in the Assurance Report

70

If the assurance practitioner refers to the work of an assurance practitioner’s expert in the assurance report, the wording of that report shall not imply that the assurance practitioner’s responsibility for the conclusion expressed in that report is reduced because of the involvement of that expert. (Ref: Para. A186–A188)

Assurance Report Prescribed by Law or Regulation

71

If the assurance practitioner is required by law or regulation to use a specific layout or wording of the assurance report, the assurance report shall refer to this or other ASAEs only if the assurance report includes, at a minimum, each of the elements identified in paragraph 69 of this ASAE.

Unmodified and Modified Conclusions

72

The assurance practitioner shall express an unmodified conclusion when the assurance practitioner concludes:

  1. In the case of a reasonable assurance engagement, that the subject matter information is prepared, in all material respects, in accordance with the applicable criteria; or
  2. In the case of a limited assurance engagement, that, based on the procedures performed and evidence obtained, no matter(s) has come to the attention of the assurance practitioner that causes the assurance practitioner to believe that the subject matter information is not prepared, in all material respects, in accordance with the applicable criteria.

73

If the assurance practitioner considers it necessary to:

  1. Draw intended users’ attention to a matter presented or disclosed in the subject matter information that, in the assurance practitioner’s judgement, is of such importance that it is fundamental to intended users’ understanding of the subject matter information (an Emphasis of Matter paragraph); or
  2. Communicate a matter other than those that are presented or disclosed in the subject matter information that, in the assurance practitioner’s judgement, is relevant to intended users’ understanding of the engagement, the assurance practitioner’s responsibilities or the assurance report (an Other Matter paragraph),

and this is not prohibited by law or regulation, the assurance practitioner shall do so in a paragraph in the assurance report, with an appropriate heading, that clearly indicates the assurance practitioner’s conclusion is not modified in respect of the matter. In the case of an Emphasis of Matter paragraph, such a paragraph shall refer only to information presented or disclosed in the subject matter information.

74

The assurance practitioner shall express a modified conclusion in the following circumstances:

  1. When, in the assurance practitioner’s professional judgement, a scope limitation exists and the effect of the matter could be material (see paragraph 66). In such cases, the assurance practitioner shall express a qualified conclusion or a disclaimer of conclusion.
  2. When, in the assurance practitioner’s professional judgement, the subject matter information is materially misstated. In such cases, the assurance practitioner shall express a qualified conclusion or adverse conclusion. (Ref: Para. A191)

75

The assurance practitioner shall express a qualified conclusion when, in the assurance practitioner’s professional judgement, the effects, or possible effects, of a matter are not so material and pervasive as to require an adverse conclusion or a disclaimer of conclusion. A qualified conclusion shall be expressed as being “except for” the effects, or possible effects, of the matter to which the qualification relates. (Ref: Para. A189–A190)

76

If the assurance practitioner expresses a modified conclusion because of a scope limitation but is also aware of a matter(s) that causes the subject matter information to be materially misstated, the assurance practitioner shall include in the assurance report a clear description of both the scope limitation and the matter(s) that causes that the subject matter information to be materially misstated.

77

When the statement made by the appropriate party has identified and properly described that the subject matter information is materially misstated, the assurance practitioner shall either:

  1. Express a qualified conclusion or adverse conclusion phrased in terms of the underlying subject matter and the applicable criteria; or
  2. If specifically required by the terms of the engagement to phrase the conclusion in terms of a statement made by the appropriate party, express an unqualified conclusion but include an Emphasis of Matter paragraph in the assurance report referring to the statement made by the appropriate party that identifies and properly describes that the subject matter information is materially misstated. (Ref: Para. A192)

Other Communication Responsibilities

78

The assurance practitioner shall consider whether, pursuant to the terms of the engagement and other engagement circumstances, any matter has come to the attention of the assurance practitioner that is to be communicated with the responsible party, the measurer or evaluator, the engaging party, those charged with governance or others. (Ref: Para. A193‑A199)

Documentation

79

The assurance practitioner shall prepare on a timely basis engagement documentation that provides a record of the basis for the assurance report that is sufficient and appropriate to enable an experienced assurance practitioner, having no previous connection with the engagement, to understand: (Ref: Para. A200–A204)

  1. The nature, timing and extent of the procedures performed to comply with relevant ASAEs and applicable legal and regulatory requirements;
  2. The results of the procedures performed, and the evidence obtained; and
  3. Significant matters arising during the engagement, the conclusions reached thereon, and significant professional judgements made in reaching those conclusions.

80

If the assurance practitioner identifies information that is inconsistent with the assurance practitioner’s final conclusion regarding a significant matter, the assurance practitioner shall document how the assurance practitioner addressed the inconsistency.

81

The assurance practitioner shall assemble the engagement documentation in an engagement file and complete the administrative process of assembling the final engagement file on a timely basis after the date of the assurance report. (Ref: Para. A205–A206)

82

After the assembly of the final engagement file has been completed, the assurance practitioner shall not delete or discard engagement documentation of any nature before the end of its retention period. (Ref: Para. A207)

83

If the assurance practitioner finds it necessary to amend existing engagement documentation or add new engagement documentation after the assembly of the final engagement file has been completed the assurance practitioner shall, regardless of the nature of the amendments or additions, document:

  1. The specific reasons for making the amendments or additions; and
  2. When, and by whom, they were made and reviewed.

*_2

See ASA 102.

*_3

The term the “lead assurance practitioner” is referred to in ASQC 1 as the “engagement partner”.

Application and Other Explanatory Material

Includes: Introduction, Objectives, Definitions, Conduct of an Assurance Engagement in Accordance with ASAEs, Ethical Requirements, Acceptance and Continuance, Quality Control, Professional Scepticism and Professional Judgement , Planning and Performing the Engagement, Obtaining Evidence, Subsequent Events, Other Information , Description of Applicable Criteria , Forming the Assurance Conclusion, Preparing the Assurance Report, Unmodified and Modified Conclusions , Other Communication Responsibilities , Documentation , Roles and Responsibilities

Introduction

(Ref: Para. 6(c))

Objectives

Engagements with Subject Matter Information Comprising a Number of Aspects (Ref: Para. 10(b), 65, 69(l))

Definitions

The Nature, Timing and Extent of Procedures in Limited and Reasonable Assurance Engagements (Ref: Para. 12(a)(i))

A3

Because the level of assurance obtained in a limited assurance engagement is lower than in a reasonable assurance engagement, the procedures the assurance practitioner performs in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement.  The primary differences between the procedures for a reasonable assurance engagement and a limited assurance engagement include:

  1. The emphasis placed on the nature of various procedures as a source of evidence will likely differ, depending on the engagement circumstances.  For example, the assurance practitioner may judge it to be appropriate in the circumstances of a particular limited assurance engagement to place relatively greater emphasis on enquiries of the entity’s personnel and analytical procedures, and relatively less emphasis, if any, on testing of controls and obtaining evidence from external sources than may be the case for a reasonable assurance engagement. 
  2. In a limited assurance engagement the assurance practitioner may:
    1. Select less items for examination; or
    2. Perform fewer procedures (for example, performing only analytical procedures in circumstances when, in a reasonable assurance engagement, both analytical procedures and other procedures would be performed).
  3. In a reasonable assurance engagement, analytical procedures performed in response to the engagement risk involve developing expectations that are sufficiently precise to identify material misstatements.  In a limited assurance engagement, analytical procedures may be designed to support expectations regarding the direction of trends, relationships and ratios rather than to identify misstatements with the level of precision expected in a reasonable assurance engagement.
  4. Further, when significant fluctuations, relationships or differences are identified, appropriate evidence in a limited assurance engagement may be obtained by making enquiries and considering responses received in the light of known engagement circumstances.
  5. In addition, when undertaking analytical procedures in a limited assurance engagement the assurance practitioner may, for example use data that is more highly aggregated, such as quarterly data rather than monthly data, or use data that has not been subjected to separate procedures to test its reliability to the same extent as it would be for a reasonable assurance engagement.

A Level of Assurance that is Meaningful (Ref: Para. 12(a)(i)b)

A4

The level of assurance the assurance practitioner plans to obtain is not ordinarily susceptible to quantification, and whether it is meaningful is a matter of professional judgement for the assurance practitioner to determine in the circumstances of the engagement.  In a limited assurance engagement, the assurance practitioner performs procedures that are limited compared with those necessary in a reasonable assurance engagement but are, nonetheless, planned to obtain a level of assurance that is meaningful.  To be meaningful the level of assurance obtained by the assurance practitioner is likely to enhance the intended users’ confidence about the subject matter information to a degree that is clearly more than inconsequential (see also paragraphs A16–A18).

A5

Across the range of all limited assurance engagements, what is meaningful assurance can vary from just above assurance that is likely to enhance the intended users’ confidence about the subject matter information to a degree that is clearly more than inconsequential to just below reasonable assurance.  What is meaningful in a particular engagement represents a judgement within that range that depends on the engagement circumstances, including the information needs of intended users as a group, the criteria, and the underlying subject matter of the engagement.

A7

Some of the factors that may be relevant in determining what constitutes meaningful assurance in a specific engagement include, for example:

  • The characteristics of the underlying subject matter and the criteria, and whether there are any relevant subject matter‑specific ASAEs.
  • Instructions or other indications from the engaging party about the nature of the assurance the engaging party is seeking the assurance practitioner to obtain.  For example, the terms of the engagement may stipulate particular procedures that the engaging party considers necessary or particular aspects of the subject matter information on which the engaging party would like the assurance practitioner to focus procedures.  However, the assurance practitioner may consider that other procedures are required to obtain sufficient appropriate evidence to obtain meaningful assurance.
  • Generally accepted practice, if it exists, with respect to assurance engagements for the particular subject matter information, or similar or related subject matter information.
  • The information needs of intended users as a group.  Generally, the greater the consequence to intended users of receiving an inappropriate conclusion when the subject matter information is materially misstated, the greater the assurance that would be needed in order to be meaningful to them.  For example, in some cases, the consequence to intended users of receiving an inappropriate conclusion may be so great that a reasonable assurance engagement is needed for the assurance practitioner to obtain assurance that is meaningful in the circumstances.
  • The expectation by intended users that the assurance practitioner will form the limited assurance conclusion on the subject matter information within a short timeframe and at a low cost.

Examples of Attestation Engagements (Ref: Para. 12(a)(ii)a)

A8

Examples of engagements that may be conducted under this ASAE include:

  1. Sustainability – An engagement on sustainability involves obtaining assurance on a report prepared by management or management’s expert (the measurer or evaluator) on the sustainability performance of the entity.
  2. Compliance with law or regulation – An engagement on compliance with law or regulation involves obtaining assurance on a statement by another party (the measurer or evaluator) of compliance with the relevant law or regulation.
  3. Value for money – An engagement on value for money involves obtaining assurance on a measurement or evaluation of value for money by another party (the measurer or evaluator).

Assurance Skills and Techniques (Ref: Para. 12(b))

A9

Assurance skills and techniques include:

  • Application of professional scepticism and professional judgement;
  • Planning and performing an assurance engagement, including obtaining and evaluating evidence;
  • Understanding information systems and the role and limitations of internal control;
  • Linking the consideration of materiality and engagement risks to the nature, timing and extent of procedures;
  • Applying procedures as appropriate to the engagement (which may include enquiry, inspection, re‑calculation, re‑performance, observation, confirmation, and analytical procedures); and
  • Systematic documentation practices and assurance report‑writing skills.

Criteria (Ref: Para. 12(c), Appendix 1)

Engagement Risk (Ref: Para. 12(f), Appendix 1)

A11

Engagement risk does not refer to, or include, the assurance practitioner’s business risks, such as loss from litigation, adverse publicity, or other events arising in connection with particular subject matter information.

A12

In general, engagement risk can be represented by the following components, although not all of these components will necessarily be present or significant for all assurance engagements:

  1. Risks that the assurance practitioner does not directly influence, which in turn consist of:
    1. The susceptibility of the subject matter information to a material misstatement before consideration of any related controls applied by the appropriate party(ies) (inherent risk); and
    2. The risk that a material misstatement that occurs in the subject matter information will not be prevented, or detected and corrected, on a timely basis by the appropriate party(ies)’s internal control (control risk); and
  2. The risk that the assurance practitioner does directly influence, which is the risk that the procedures performed by the assurance practitioner will not detect a material misstatement (detection risk).

A13

The degree to which each of these components is relevant to the engagement is affected by the engagement circumstances, in particular:

  • The nature of the underlying subject matter and the subject matter information.  For example, the concept of control risk may be more useful when the underlying subject matter relates to the preparation of information about an entity’s performance than when it relates to information about the effectiveness of a control or the existence of a physical condition.
  • Whether a reasonable assurance or a limited assurance engagement is being performed.  For example, in limited assurance engagements the assurance practitioner may often decide to obtain evidence by means other than testing of controls, in which case consideration of control risk may be less relevant than in a reasonable assurance engagement on the same subject matter information.

The consideration of risks is a matter of professional judgement, rather than a matter capable of precise measurement.

A14

Reducing engagement risk to zero is very rarely attainable or cost beneficial and, therefore, “reasonable assurance” is less than absolute assurance, as a result of factors such as the following:

  • The use of selective testing.
  • The inherent limitations of internal control.
  • The fact that much of the evidence available to the assurance practitioner is persuasive rather than conclusive.
  • The use of professional judgement in gathering and evaluating evidence and forming conclusions based on that evidence.
  • In some cases, the characteristics of the underlying subject matter when evaluated or measured against the criteria.

The Engaging Party (Ref: Para. 12(g), Appendix 1)

Intended Users (Ref: Para. 12(m), Appendix 1)

A17

Intended users or their representatives may be directly involved with the assurance practitioner and the responsible party (and the engaging party if different) in determining the requirements of the engagement.  Regardless of the involvement of others however, and unlike an agreed‑upon procedures engagement (which involves reporting factual findings based upon procedures agreed with the engaging party and any appropriate third parties, rather than a conclusion):

  1. The assurance practitioner is responsible for determining the nature, timing and extent of procedures; and
  2. The assurance practitioner may need to perform additional procedures if information comes to the assurance practitioner’s attention that differs significantly from that on which the determination of planned procedures was based (see paragraphs A116–A118).

A18

In some cases, intended users (for example, bankers and regulators) impose a requirement on, or request the appropriate party(ies) to arrange for an assurance engagement to be performed for a specific purpose.  When engagements use criteria that are designed for a specific purpose, paragraph 69(f) requires a statement alerting readers to this fact.  In addition, the assurance practitioner may consider it appropriate to indicate that the assurance report is intended solely for specific users.  Depending on the engagement circumstances, this may be achieved by restricting the distribution or use of the assurance report (see paragraphs A167–A168).

Subject Matter Information (Ref: Para. 12(x), Appendix 1)

The Appropriate Party(ies) (Ref: Para. 13, Appendix 1)

A20

The roles played by the responsible party, the measurer or evaluator, and the engaging party can vary (see paragraph A36).  Also, management and governance structures vary by jurisdiction and by entity, reflecting influences such as different cultural and legal backgrounds, and size and ownership characteristics.  Such diversity means that it is not possible for ASAEs to specify for all engagements the person(s) with whom the assurance practitioner is to enquire of, request representations from, or otherwise communicate with in all circumstances.  In some cases, for example, when the appropriate party(ies) is only part of a complete legal entity, identifying the appropriate management personnel or those charged with governance with whom to communicate will require the exercise of professional judgement to determine which person(s) have the appropriate responsibilities for, and knowledge of, the matters concerned.

Conduct of an Assurance Engagement in Accordance with ASAEs

Complying with Standards that are Relevant to the Engagement (Ref: Para. 1, 515)

A21

This ASAE includes requirements that apply to assurance engagements[3] (other than audits or reviews of historical financial information), including engagements in accordance with a subject matter‑specific ASAE.  In some cases, a subject matter‑specific ASAE is also relevant to the engagement.  A subject matter‑specific ASAE is relevant to the engagement when the ASAE is in effect, the subject matter of the ASAE is relevant to the engagement, and the circumstances addressed by the ASAE exist.

Text of an ASAE (Ref: Para. 1216)

A24

The objectives in an ASAE provide the context in which the requirements of the ASAE are set, and are intended to assist in:

  1. Understanding what is to be accomplished; and
  2. Deciding whether more needs to be done to achieve the objectives.

The proper application of the requirements of an ASAE by the assurance practitioner is expected to provide a sufficient basis for the assurance practitioner’s achievement of the objectives.  However, because the circumstances of assurance engagements vary widely and all such circumstances cannot be anticipated in the ASAEs, the assurance practitioner is responsible for determining the procedures necessary to fulfil the requirements of relevant ASAEs and to achieve the objectives stated therein.  In the circumstances of an engagement, there may be particular matters that require the assurance practitioner to perform procedures in addition to those required by relevant ASAEs to meet the objectives specified in those ASAEs.

A25

The requirements of ASAEs are expressed using “shall.”

A26

Where necessary, the application and other explanatory material provides further explanation of the requirements and guidance for carrying them out.  In particular, it may:

  1. Explain more precisely what a requirement means or is intended to cover; and
  2. Include examples that may be appropriate in the circumstances.

While such guidance does not in itself impose a requirement, it is relevant to the proper application of the requirements.  The application and other explanatory material may also provide background information on matters addressed in an ASAE.  Where appropriate, additional considerations specific to public sector audit organisations or smaller firms are included within the application and other explanatory material.  These additional considerations assist in the application of the requirements in the ASAEs.  They do not, however, limit or reduce the responsibility of the assurance practitioner to apply and comply with the requirements in an ASAE.

Complying with Relevant Requirements (Ref: Para. 17)

Ethical Requirements

(Ref: Para. 3(a), Aus 20.1, 22(a))

A30

Relevant ethical requirements[*] include the following fundamental principles with which the assurance practitioner is required to comply:

  1. Integrity;
  2. Objectivity;
  3. Professional competence and due care;
  4. Confidentiality; and
  5. Professional behaviour.

A31

Relevant ethical requirements[#] also provide a conceptual framework for assurance practitioners to apply to:

  1. Identify threats to compliance with the fundamental principles.  Threats fall into one or more of the following categories:
    1. Self‑interest;
    2. Self‑review;
    3. Advocacy;
    4. Familiarity; and
    5. Intimidation;
  2. Evaluate the significance of the threats identified; and
  3. Apply safeguards, when necessary, to eliminate the threats or reduce them to an acceptable level.  Safeguards are necessary when the assurance practitioner determines that the threats are not at a level at which a reasonable and informed third party would be likely to conclude, weighing all the specific facts and circumstances available to the assurance practitioner at that time, that compliance with the fundamental principles is not compromised.

A32

Relevant ethical requirements[*] also describe how the conceptual framework applies in certain situations to assurance practitioners in public practice, including:

  • Professional appointment;
  • Conflicts of interest;
  • Second opinions;
  • Fees and other types of remuneration;
  • Marketing professional services;
  • Gifts and hospitality;
  • Custody of client assets;
  • Objectivity; and
  • Independence.

A33

Relevant ethical requirements# define independence as comprising both independence of mind and independence in appearance.  Independence safeguards the ability to form an assurance conclusion without being affected by influences that might compromise that conclusion.  Independence enhances the ability to act with integrity, to be objective and to maintain an attitude of professional scepticism.  Matters addressed in the relevant ethical requirements with respect to independence include:

  • Financial interests;
  • Loans and guarantees;
  • Business relationships;
  • Family and personal relationships;
  • Employment with assurance clients;
  • Temporary staff assignments;
  • Recent service with an assurance client;
  • Serving as a director or officer of an assurance client;
  • Long association of senior personnel with assurance clients;
  • Provision of non‑assurance services to assurance clients;
  • Fees (relative size, overdue, and contingent fees);
  • Compensation and evaluation policies;
  • Gifts and hospitality; and
  • Actual or threatened litigation.

Acceptance and Continuance

Preconditions for the Engagement (Ref: Para. 24)

A35

In a public sector environment, some of the preconditions for an assurance engagement may be assumed to be present, for example:

  1. The roles and responsibilities of public sector audit organisations and the public sector entities scoped into assurance engagements are assumed to be appropriate because they are generally set out in legislation;
  2. Public sector audit organisations’ right of access to the information necessary to perform the engagement is often set out in legislation;
  3. The assurance practitioner’s conclusion, in the form appropriate to either a reasonable assurance engagement or a limited assurance engagement, is generally required by legislation to be contained in a written report; and
  4. A rational purpose is generally present because the engagement is set out in legislation.

Roles and Responsibilities (Ref: Para. Aus 12.1, 12(m), 12(n), 12(v), 1324(a), Appendix 1)

A38

Evidence that the appropriate relationship exists with respect to responsibility for the underlying subject matter may be obtained through an acknowledgement provided by the responsible party.  Such an acknowledgement also establishes a basis for a common understanding of the responsibilities of the responsible party and the assurance practitioner.  A written acknowledgement is the most appropriate form of documenting the responsible party’s understanding.  In the absence of a written acknowledgement of responsibility, it may still be appropriate for the assurance practitioner to accept the engagement if, for example, other sources, such as legislation or a contract, indicate responsibility.  In other cases, it may be appropriate to decline the engagement depending on the circumstances, or to disclose the circumstances in the assurance report.

Appropriateness of the Underlying Subject Matter (Ref: Para. 24(b)(i))

A41

The appropriateness of an underlying subject matter is not affected by the level of assurance, that is, if an underlying subject matter is not appropriate for a reasonable assurance engagement, it is also not appropriate for a limited assurance engagement, and vice versa.

A42

Different underlying subject matters have different characteristics, including the degree to which information about them is qualitative versus quantitative, objective versus subjective, historical versus prospective, and relates to a point in time or covers a period.  Such characteristics affect the:

  1. Precision with which the underlying subject matter can be measured or evaluated against criteria; and
  2. The persuasiveness of available evidence.

A43

Identifying such characteristics and considering their effects assist the assurance practitioner when assessing the appropriateness of the underlying subject matter and also in determining the content of the assurance report (see paragraph A164).

Suitability and Availability of the Criteria

Suitability of the criteria (Ref: Para. 24(b)(ii))

A45

Suitable criteria exhibit the following characteristics:

  1. Relevance: Relevant criteria result in subject matter information that assists decision‑making by the intended users.
  2. Completeness: Criteria are complete when subject matter information prepared in accordance with them does not omit relevant factors that could reasonably be expected to affect decisions of the intended users made on the basis of that subject matter information.  Complete criteria include, where relevant, benchmarks for presentation and disclosure.
  3. Reliability: Reliable criteria allow reasonably consistent measurement or evaluation of the underlying subject matter including, where relevant, presentation and disclosure, when used in similar circumstances by different assurance practitioners.
  4. Neutrality: Neutral criteria result in subject matter information that is free from bias as appropriate in the engagement circumstances.
  5. Understandability: Understandable criteria result in subject matter information that can be understood by the intended users.

A46

Vague descriptions of expectations or judgements of an individual’s experiences do not constitute suitable criteria.

A47

The suitability of criteria for a particular engagement depends on whether they reflect the above characteristics.  The relative importance of each characteristic to a particular engagement is a matter of professional judgement.  Further, criteria may be suitable for a particular set of engagement circumstances, but may not be suitable for a different set of engagement circumstances.  For example, reporting to governments or regulators may require the use of a particular set of criteria, but these criteria may not be suitable for a broader group of users.

A48

Criteria can be selected or developed in a variety of ways, for example, they may be:

  • Embodied in law or regulation.
  • Issued by authorised or recognised bodies of experts that follow a transparent due process.
  • Developed collectively by a group that does not follow a transparent due process.
  • Published in scholarly journals or books.
  • Developed for sale on a proprietary basis.
  • Specifically designed for the purpose of preparing the subject matter information in the particular circumstances of the engagement.

How criteria are developed may affect the work that the assurance practitioner carries out to assess their suitability.

A49

In some cases, law or regulation prescribe the criteria to be used for the engagement.  In the absence of indications to the contrary, such criteria are presumed to be suitable, as are criteria issued by authorised or recognised bodies of experts that follow a transparent due process if they are relevant to the intended users’ information needs.  Such criteria are known as established criteria.  Even when established criteria exist for an underlying subject matter, specific users may agree to other criteria for their specific purposes.  For example, various frameworks can be used as established criteria for evaluating the effectiveness of internal control.  Specific users may, however, develop a more detailed set of criteria that meet their specific information needs in relation to, for example, prudential supervision.  In such cases, the assurance report:

  1. Alerts readers that the subject matter information is prepared in accordance with special purpose criteria and that, as a result, the subject matter information may not be suitable for another purpose (see paragraph 69(f)); and
  2. May note, when it is relevant to the circumstances of the engagement, that the criteria are not embodied in law or regulation, or issued by authorised or recognised bodies of experts that follow a transparent due process.

Availability of the criteria (Ref: Para. 24(b)(iii))

A51

Criteria need to be available to the intended users to allow them to understand how the underlying subject matter has been measured or evaluated.  Criteria are made available to the intended users in one or more of the following ways:

  1. Publicly.
  2. Through inclusion in a clear manner in the presentation of the subject matter information.
  3. Through inclusion in a clear manner in the assurance report (see paragraph A165).
  4. By general understanding, for example the criterion for measuring time in hours and minutes.

A52

Criteria may also be available only to intended users, for example the terms of a contract, or criteria issued by an industry association that are available only to those in the industry because they are relevant only to a specific purpose.  When this is the case, paragraph 69(f) requires a statement alerting readers to this fact.  In addition, the assurance practitioner may consider it appropriate to indicate that the assurance report is intended solely for specific users (see paragraph A167–A168).

Access to Evidence (Ref: Para. 24(b)(iv))

Quantity and quality of available evidence

A53

The quantity or quality of available evidence is affected by:

  1. The characteristics of the underlying subject matter or the subject matter information.  For example, less objective evidence might be expected when the subject matter information is future oriented rather than historical; and
  2. Other circumstances, such as when evidence that could reasonably be expected to exist is not available because of, for example, the timing of the assurance practitioner’s appointment, an entity’s document retention policy, inadequate information systems, or a restriction imposed by the responsible party.

Ordinarily, evidence will be persuasive rather than conclusive.

Access to records (Ref: Para. 56)

A54

Seeking the agreement of the appropriate party(ies) that it acknowledges and understands its responsibility to provide the assurance practitioner with the following may assist the assurance practitioner in determining whether the engagement exhibits the characteristic of access to evidence:

  1. Access to all information of which the appropriate party(ies) is aware that is relevant to the preparation of the subject matter information such as records, documentation and other matters;
  2. Additional information that the assurance practitioner may request from the appropriate party(ies) for the purpose of the engagement; and
  3. Unrestricted access to persons from the appropriate party(ies) from whom the assurance practitioner determines it necessary to obtain evidence.

A Rational Purpose (Ref: Para. 24(b)(vi))

A56

In determining whether the engagement has a rational purpose, relevant considerations may include the following:

  • The intended users of the subject matter information and the assurance report (particularly, when the criteria are designed for a special purpose).  A further consideration is the likelihood that the subject matter information and the assurance report will be used or distributed more broadly than to intended users.
  • Whether aspects of the subject matter information are expected to be excluded from the assurance engagement, and the reason for their exclusion.
  • The characteristics of the relationships between the responsible party, the measurer or evaluator, and the engaging party, for example, when the measurer or evaluator is not the responsible party, whether the responsible party consents to the use to be made of the subject matter information and will have the opportunity to review the subject matter information before it is made available to intended users or to distribute comments with the subject matter information.
  • Who selected the criteria to be applied to measure or evaluate the underlying subject matter, and what the degree of judgement and scope for bias is in applying them.  The engagement is more likely to have a rational purpose if the intended users selected or were involved in selecting the criteria.
  • Any significant limitations on the scope of the assurance practitioner’s work.
  • Whether the assurance practitioner believes the engaging party intends to associate the assurance practitioner’s name with the underlying subject matter or the subject matter information in an inappropriate manner.

Agreeing on the Terms of the Engagement (Ref: Para. 27)

Acceptance of a Change in the Terms of the Engagement (Ref: Para. 29)

A59

A change in circumstances that affects the intended users’ requirements, or a misunderstanding concerning the nature of the engagement, may justify a request for a change in the engagement, for example, from an assurance engagement to a non-assurance engagement, or from a reasonable assurance engagement to a limited assurance engagement. An inability to obtain sufficient appropriate evidence to form a reasonable assurance conclusion is not an acceptable reason to change from a reasonable assurance engagement to a limited assurance engagement.

Quality Control

Assurance Practitioners in Public Practice (Ref: Para. Aus 20.131(a)–(b))

A60

This ASAE has been written in the context of a range of measures taken to ensure the quality of assurance engagements undertaken by assurance practitioners in public practice.  Such measures may include:

  • Competency requirements, such as education and experience benchmarks for entry to membership, and ongoing continuing professional development as well as life‑long learning requirements.
  • Quality control policies and procedures implemented across the firm.  ASQC 1 applies to all firms of assurance practitioners in respect of assurance and related services engagements.
  • A comprehensive Code of Ethics, including detailed independence requirements, founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Firm Level Quality Control (Ref: Para. 3(b), 31(a))

A61

ASQC 1 deals with the firm’s responsibilities to establish and maintain its system of quality control for assurance engagements.  It sets out the responsibilities of the firm for establishing policies and procedures designed to provide it with reasonable assurance that the firm and its personnel comply with relevant ethical requirements, including those pertaining to independence.  Compliance with ASQC 1 requires, among other things, that the firm establish and maintain a system of quality control that includes policies and procedures addressing each of the following elements, and that it documents its policies and procedures and communicates them to the firm’s personnel:

  1. Leadership responsibilities for quality within the firm;
  2. Relevant ethical requirements;
  3. Acceptance and continuance of client relationships and specific engagements;
  4. Human resources;
  5. Engagement performance; and
  6. Monitoring.

A62

[Deleted by the AUASB.]

A63

The actions of the lead assurance practitioner, and appropriate messages to the other members of the engagement team, in the context of the lead assurance practitioner taking responsibility for the overall quality on each engagement, emphasise the fact that quality is essential in performing an assurance engagement, and the importance to the quality of the assurance engagement of:

  1. Performing work that complies with professional standards and regulatory and legal requirements. 
  2. Complying with the firm’s quality control policies and procedures as applicable.
  3. Issuing a report for the engagement that is appropriate in the circumstances.
  4. The engagement team’s ability to raise concerns without fear of reprisals.

A64

An effective system of quality control includes a monitoring process designed to provide the firm with reasonable assurance that its policies and procedures relating to the system of quality control are relevant, adequate and operating effectively.

A65

Unless information provided by the firm or other parties suggests otherwise, the engagement team is entitled to rely on the firm’s system of quality control.  For example, the engagement team may rely on the firm’s system of quality control in relation to:

  1. Competence of personnel through their recruitment and formal training.
  2. Independence through the accumulation and communication of relevant independence information.
  3. Maintenance of client relationships through acceptance and continuance systems.
  4. Adherence to regulatory and legal requirements through the monitoring process.

In considering deficiencies identified in the firm’s system of quality control that may affect the assurance engagement, the lead assurance practitioner may consider measures taken by the firm to rectify those deficiencies. 

Skills, Knowledge and Experience with Respect to the Underlying Subject Matter and Its Measurement or Evaluation (Ref: Para. 31(c))

A68

The relevant ethical requirements related to assurance engagements require the assurance practitioner in public practice to agree to provide only those services that the assurance practitioner in public practice is competent to perform.[*] [4] The assurance practitioner has sole responsibility for the assurance conclusion expressed, and that responsibility is not reduced by the assurance practitioner’s use of the work of an assurance practitioner’s expert.  Nonetheless, if the assurance practitioner using the work of an assurance practitioner’s expert, having followed this ASAE, concludes that the work of that expert is adequate for the assurance practitioner’s purposes, the assurance practitioner may accept that expert’s findings or conclusions in the expert’s field as appropriate evidence.

Assignment of the Team

Collective Competence and Capabilities (Ref: Para. 32)

Assurance Practitioner’s Expert (Ref: Para. 32(a), 32(b)(i))

A70

Some of the assurance work may be performed by a multi‑disciplinary team that includes one or more assurance practitioner’s expert.  For example, an assurance practitioner’s expert may be needed to assist the assurance practitioner in obtaining an understanding of the underlying subject matter and other engagement circumstances or in one or more of the matters mentioned in paragraph 46R (in the case of a reasonable assurance engagement) or 46L (in the case of a limited assurance engagement).

A71

When the work of an assurance practitioner’s expert is to be used, it may be appropriate to perform some of the procedures required by paragraph 52 at the engagement acceptance or continuance stage.

Other Assurance Practitioners (Ref: Para. 32(b)(ii))

A73

The work of another assurance practitioner may be used in relation to, for example, an underlying subject matter at a remote location or in a foreign jurisdiction.  Such other assurance practitioners are not part of the engagement team.  Relevant considerations when the engagement team plans to use the work of another assurance practitioner may include:

  • Whether the other assurance practitioner understands and complies with the ethical requirements that are relevant to the engagement and, in particular, is independent.
  • The other assurance practitioner’s professional competence.
  • The extent of the engagement team’s involvement in the work of the other assurance practitioner.
  • Whether the other assurance practitioner operates in a regulatory environment that actively oversees that assurance practitioner.

Review Responsibilities (Ref: Para. 33(c))

Engagement Quality Control Review (Ref: Para. 36(b))

A75

Other matters that may be considered in an engagement quality control review include:

  1. The engagement team’s evaluation of the firm’s independence in relation to the engagement;
  2. Whether appropriate consultation has taken place on matters involving differences of opinion or other difficult or contentious matters, and the conclusions arising from those consultations; and
  3. Whether engagement documentation selected for review reflects the work performed in relation to the significant judgements and supports the conclusions reached.

Professional Scepticism and Professional Judgement

Professional Scepticism (Ref: Para. 37)

A76

Professional scepticism is an attitude that includes being alert to, for example:

  • Evidence that is inconsistent with other evidence obtained.
  • Information that calls into question the reliability of documents and responses to enquiries to be used as evidence.
  • Circumstances that suggest the need for procedures in addition to those required by relevant ASAEs.
  • Conditions that may indicate likely misstatement.

A77

Maintaining professional scepticism throughout the engagement is necessary if the assurance practitioner is, for example, to reduce the risks of:

  • Overlooking unusual circumstances.
  • Overgeneralising when drawing conclusions from observations.
  • Using inappropriate assumptions in determining the nature, timing, and extent of the procedures, and evaluating the results thereof.

A78

Professional scepticism is necessary to the critical assessment of evidence.  This includes questioning inconsistent evidence and the reliability of documents and responses to enquiries.  It also includes consideration of the sufficiency and appropriateness of evidence obtained in the light of the circumstances.

A79

Unless the engagement involves assurance about whether documents are genuine, the assurance practitioner may accept records and documents as genuine unless the assurance practitioner has reason to believe the contrary.  Nevertheless, the assurance practitioner is required by paragraph 50 to consider the reliability of information to be used as evidence.

Professional Judgement (Ref: Para. 38)

A81

Professional judgement is essential to the proper conduct of an assurance engagement.  This is because interpretation of relevant ethical requirements and relevant ASAEs and the informed decisions required throughout the engagement cannot be made without the application of relevant training, knowledge, and experience to the facts and circumstances.  Professional judgement is necessary in particular regarding decisions about:

  • Materiality and engagement risk.
  • The nature, timing, and extent of procedures used to meet the requirements of relevant ASAEs and obtain evidence.
  • Evaluating whether sufficient appropriate evidence has been obtained, and whether more needs to be done to achieve the objectives of this ASAE and any relevant subject matter specific ASAE.  In particular, in the case of a limited assurance engagement, professional judgement is required in evaluating whether a meaningful level of assurance has been obtained.
  • The appropriate conclusions to draw based on the evidence obtained.

A82

The distinguishing feature of the professional judgement expected of an assurance practitioner is that it is exercised by an assurance practitioner whose training, knowledge and experience have assisted in developing the necessary competencies to achieve reasonable judgements.

A83

The exercise of professional judgement in any particular case is based on the facts and circumstances that are known by the assurance practitioner.  Consultation on difficult or contentious matters during the course of the engagement, both within the engagement team and between the engagement team and others at the appropriate level within or outside the firm assist the assurance practitioner in making informed and reasonable judgements, including the extent to which particular items in the subject matter information are affected by judgement of the appropriate party.

A84

Professional judgement can be evaluated based on whether the judgement reached reflects a competent application of assurance and measurement or evaluation principles and is appropriate in the light of, and consistent with, the facts and circumstances that were known to the assurance practitioner up to the date of the assurance practitioner’s assurance report.

A85

Professional judgement needs to be exercised throughout the engagement. It also needs to be appropriately documented. In this regard, paragraph 79 requires the assurance practitioner to prepare documentation sufficient to enable an experienced assurance practitioner, having no previous connection with the engagement, to understand the significant professional judgements made in reaching conclusions on significant matters arising during the engagement. Professional judgement is not to be used as the justification for decisions that are not otherwise supported by the facts and circumstances of the engagement or sufficient appropriate evidence.

Planning and Performing the Engagement

Planning (Ref: Para. 40)

A86

Planning involves the lead assurance practitioner, other key members of the engagement team, and any key assurance practitioner’s external experts developing an overall strategy for the scope, emphasis, timing and conduct of the engagement, and an engagement plan, consisting of a detailed approach for the nature, timing and extent of procedures to be performed, and the reasons for selecting them.  Adequate planning helps to devote appropriate attention to important areas of the engagement, identify potential problems on a timely basis and properly organise and manage the engagement in order for it to be performed in an effective and efficient manner.  Adequate planning also assists the assurance practitioner to properly assign work to engagement team members, and facilitates the direction, supervision, and the review of their work.  Further, it assists, where applicable, the co‑ordination of work done by other assurance practitioners and experts.  The nature and extent of planning activities will vary with the engagement circumstances, for example the complexity of the underlying subject matter and criteria.  Examples of the main matters that may be considered include:

  • The characteristics of the engagement that define its scope, including the terms of the engagement and the characteristics of the underlying subject matter and the criteria.
  • The expected timing and the nature of the communications required.
  • The results of engagement acceptance activities and, where applicable, whether knowledge gained on other engagements performed by the lead assurance practitioner for the appropriate party(ies) is relevant.
  • The engagement process.
  • The assurance practitioner’s understanding of the appropriate party(ies) and their environment, including the risks that the subject matter information may be materially misstated.
  • Identification of intended users and their information needs, and consideration of materiality and the components of engagement risk. 
  • The extent to which the risk of fraud is relevant to the engagement.
  • The nature, timing and extent of resources necessary to perform the engagement, such as personnel and expertise requirements, including the nature and extent of experts’ involvement.
  • The impact of the internal audit function on the engagement.

A87

The assurance practitioner may decide to discuss elements of planning with the appropriate party(ies) to facilitate the conduct and management of the engagement (for example, to co‑ordinate some of the planned procedures with the work of the appropriate party(ies)’s personnel).  Although these discussions often occur, the overall engagement strategy and the engagement plan remain the assurance practitioner’s responsibility.  When discussing matters included in the overall engagement strategy or engagement plan, care is required in order not to compromise the effectiveness of the engagement.  For example, discussing the nature and timing of detailed procedures with the appropriate party(ies) may compromise the effectiveness of the engagement by making the procedures too predictable.

A88

Planning is not a discrete phase, but rather a continual and iterative process throughout the engagement.  As a result of unexpected events, changes in conditions, or evidence obtained, the assurance practitioner may need to revise the overall strategy and engagement plan, and thereby the resulting planned nature, timing and extent of procedures.

A90

If in the circumstances described in paragraph 43, the assurance continues with the engagement:

  1. When, in the assurance practitioner’s professional judgement, the unsuitable applicable criteria or inappropriate underlying subject matter is likely to mislead the intended users, a qualified conclusion or adverse conclusion would be appropriate in the circumstances depending on how material and pervasive the matter is.
  2. In other cases, a qualified conclusion or a disclaimer of conclusion would be appropriate depending on, in the assurance practitioner’s professional judgement, how material and pervasive the matter is.

Materiality (Ref: Para. 44)

A93

The applicable criteria may discuss the concept of materiality in the context of the preparation and presentation of the subject matter information and thereby provide a frame of reference for the assurance practitioner in considering materiality for the engagement.  Although applicable criteria may discuss materiality in different terms, the concept of materiality generally includes the matters discussed in paragraphs A92–A100.  If the applicable criteria do not include a discussion of the concept of materiality, these paragraphs provide the assurance practitioner with a frame of reference.

A94

Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence relevant decisions of intended users taken on the basis of the subject matter information.  The assurance practitioner’s consideration of materiality is a matter of professional judgement, and is affected by the assurance practitioner’s perception of the common information needs of intended users as a group.  In this context, it is reasonable for the assurance practitioner to assume that intended users:

  1. Have a reasonable knowledge of the underlying subject matter, and a willingness to study the subject matter information with reasonable diligence;
  2. Understand that the subject matter information is prepared and assured to appropriate levels of materiality, and have an understanding of any materiality concepts included in the applicable criteria;
  3. Understand any inherent uncertainties involved in the measuring or evaluating the underlying subject matter; and
  4. Make reasonable decisions on the basis of the subject matter information taken as a whole.

Unless the engagement has been designed to meet the particular information needs of specific users, the possible effect of misstatements on specific users, whose information needs may vary widely, is not ordinarily considered (see also paragraphs A16–A18).

A95

Materiality is considered in the context of qualitative factors and, when applicable, quantitative factors.  The relative importance of qualitative factors and quantitative factors when considering materiality in a particular engagement is a matter for the assurance practitioner’s professional judgement.

 

A96

Qualitative factors may include such things as:

  • The number of persons or entities affected by the subject matter.
  • The interaction between, and relative importance of, various components of the subject matter information when it is made up of multiple components, such as a report that includes numerous performance indicators.
  • The wording chosen with respect to subject matter information that is expressed in narrative form.
  • The characteristics of the presentation adopted for the subject matter information when the applicable criteria allow for variations in that presentation.
  • The nature of a misstatement, for example, the nature of observed deviations from a control when the subject matter information is a statement that the control is effective.
  • Whether a misstatement affects compliance with law or regulation.
  • In the case of periodic reporting on an underlying subject matter, the effect of an adjustment that affects past or current subject matter information or is likely to affect future subject matter information.
  • Whether a misstatement is the result of an intentional act or is unintentional.
  • Whether a misstatement is significant having regard to the assurance practitioner’s understanding of known previous communications to users, for example, in relation to the expected outcome of the measurement or evaluation of the underlying subject matter.
  • Whether a misstatement relates to the relationship between the responsible party, the measurer or evaluator, or the engaging party or their relationship with other parties.
  • When a threshold or benchmark value has been identified, whether the result of the procedure deviates from that value.
  • When the underlying subject matter is a governmental program or public sector entity, whether a particular aspect of the program or entity is significant with regard to the nature, visibility and sensitivity of the program or entity.
  • When the subject matter information relates to a conclusion on compliance with law or regulation, the seriousness of the consequences of non‑compliance.

A97

Quantitative factors relate to the magnitude of misstatements relative to reported amounts for those aspects of the subject matter information, if any, that are:

  • Expressed numerically; or
  • Otherwise related to numerical values (for example, the number of observed deviations from a control may be a relevant quantitative factor when the subject matter information is a statement that the control is effective).

A98

When quantitative factors are applicable, planning the engagement solely to detect individually material misstatements overlooks the fact that the aggregate of uncorrected and undetected individually immaterial misstatements may cause the subject matter information to be materially misstated.  It may therefore be appropriate when planning the nature, timing and extent of procedures for the assurance practitioner to determine a quantity less than materiality as a basis for determining the nature, timing and extent of procedures.

A99

Materiality relates to the information covered by the assurance report.  Therefore, when the engagement covers some, but not all, aspects of the information communicated about an underlying subject matter, materiality is considered in relation to only that portion that is covered by the engagement.

A100

Concluding on the materiality of the misstatements identified as a result of the procedures performed requires professional judgement.  For example:

  • The applicable criteria for a value for money engagement for a hospital’s emergency department may include the speed of the services provided, the quality of the services, the number of patients treated during a shift, and benchmarking the cost of the services against other similar hospitals.  If three of these applicable criteria are satisfied but one applicable criterion is not satisfied by a small margin, then professional judgement is needed to conclude whether the hospital’s emergency department represents value for money as a whole.
  • In a compliance engagement, the entity may have complied with nine provisions of the relevant law or regulation, but did not comply with one provision.  Professional judgement is needed to conclude whether the entity complied with the relevant law or regulation as a whole.  For example, the assurance practitioner may consider the significance of the provision with which the entity did not comply, as well as the relationship of that provision to the remaining provisions of the relevant law or regulation.

Understanding the Engagement Circumstances (Ref: Para. 45–47R)

A102

The assurance practitioner may have additional responsibilities under law, regulation or relevant ethical requirements regarding an entity’s non‑compliance with laws and regulations, which may differ from or go beyond the assurance practitioner’s responsibilities under this ASAE, such as:

  1. Responding to identified or suspected non‑compliance with laws and regulations, including requirements in relation to specific communications with management and those charged with governance and considering whether further action is needed;
  2. Communicating identified or suspected non‑compliance with laws and regulations to an auditor;[7] and
  3. Documentation requirements regarding identified or suspected non‑compliance with laws and regulations.

Complying with any additional responsibilities may provide further information that is relevant to the assurance practitioner’s work in accordance with this and any other ASAE (e.g., regarding the integrity of the responsible party or those charged with governance). Paragraphs A195–A199 further address the assurance practitioner’s responsibilities under law, regulation or relevant ethical requirements regarding communicating and reporting identified or suspected non‑compliance with laws and regulations.

A103

Obtaining an understanding of the underlying subject matter and other engagement circumstances provides the assurance practitioner with a frame of reference for exercising professional judgement throughout the engagement, for example when:

  • Considering the characteristics of the underlying subject matter;
  • Assessing the suitability of criteria;
  • Considering the factors that, in the assurance practitioner’s professional judgement, are significant in directing the engagement team’s efforts, including where special consideration may be necessary; for example, the need for specialised skills or the work of an expert;
  • Establishing and evaluating the continued appropriateness of quantitative materiality levels (where appropriate), and considering qualitative materiality factors;
  • Developing expectations for use when performing analytical procedures;
  • Designing and performing procedures; and
  • Evaluating evidence, including the reasonableness of the oral and written representations received by the assurance practitioner.

Obtaining Evidence

The Nature, Timing and Extent of Procedures (Ref: Para.48(L)–49(R))

A109

The assurance practitioner chooses a combination of procedures to obtain reasonable assurance or limited assurance, as appropriate.  The procedures listed below may be used, for example, for planning or performing the engagement, depending on the context in which they are applied by the assurance practitioner:

  • Inspection;
  • Observation;
  • Confirmation;
  • Re‑calculation;
  • Re‑performance;
  • Analytical procedures; and
  • Enquiry.

A110

Factors that may affect the assurance practitioner’s selection of procedures include the nature of the underlying subject matter; the level of assurance to be obtained; and the information needs of the intended users and the engaging party, including relevant time and cost constraints.

A111

In some cases, a subject matter‑specific ASAE may include requirements that affect the nature, timing and extent of procedures.  For example, a subject matter‑specific ASAE may describe the nature or extent of particular procedures to be performed or the level of assurance expected to be obtained in a particular type of engagement.  Even in such cases, determining the exact nature, timing and extent of procedures is a matter of professional judgement and will vary from one engagement to the next.

A112

In some engagements, the assurance practitioner may not identify any areas where a material misstatement of the subject matter information is likely to arise.  Irrespective of whether any such areas have been identified, the assurance practitioner designs and performs procedures to obtain a meaningful level of assurance.

Determining Whether Additional Procedures Are Necessary in a Limited Assurance Engagement (Ref: Para. 49L)

A114

The assurance practitioner may become aware of misstatements that are, after applying professional judgement, clearly not indicative of the existence of material misstatements.  The following examples illustrate when additional procedures may not be needed because, in the assurance practitioner’s professional judgement, the identified misstatements are clearly not indicative of the existence of material misstatements:

  • If materiality is 10,000 units, and the assurance practitioner judges that a potential error of 100 units may exist, then additional procedures would not generally be required, unless there are other qualitative factors that need to be considered, because the risk of a material misstatement is likely to be acceptable in the engagement circumstances. 
  • If, in performing a set of procedures over an area where material misstatements are likely, a response to one enquiry among many was not as expected, additional procedures may not be needed if the risk of a material misstatement is, nevertheless, at a level that is acceptable in the circumstances of the engagement in light of the results of other procedures.

A115

The assurance practitioner may become aware of a matter(s) that causes the assurance practitioner to believe that the subject matter information may be materially misstated.  The following examples illustrate when additional procedures may be needed as the identified misstatements indicate that the subject matter information may be materially misstated:

  • When performing analytical procedures, the assurance practitioner may identify a fluctuation or relationship that is inconsistent with other relevant information or that differs significantly from expected amounts or ratios.
  • The assurance practitioner may become aware of a potential material misstatement from reviewing external sources.
  • If the applicable criteria permit a 10% error rate and, based on a particular test, the assurance practitioner discovered a 9% error rate, then additional procedures may be needed because the risk of a material misstatement may not be acceptable in the engagement circumstances.
  • If the results of analytical procedures are within expectations but are, nevertheless, close to exceeding the expected value, then additional procedures may be needed because the risk of a material misstatement may not be acceptable in the engagement circumstances.

A116

If, in the case of a limited assurance engagement, a matter(s) comes to the assurance practitioner’s attention that causes the assurance practitioner to believe the subject matter information may be materially misstated, the assurance practitioner is required by paragraph 49L to design and perform additional procedures.  Additional procedures may include, for example, enquiring of the appropriate party(ies) or performing other procedures as appropriate in the circumstances. 

A117

If, having performed the additional procedures required by paragraph 49L, the assurance practitioner is not able to obtain sufficient appropriate evidence to either conclude that the matter(s) is not likely to cause the subject matter information to be materially misstated or determine that it does cause the subject matter information to be materially misstated, a scope limitation exists and paragraph 66 applies.

A118

The assurance practitioner’s judgement about the nature, timing and extent of additional procedures that are needed to obtain evidence to either conclude that a material misstatement is not likely, or determine that a material misstatement exists, is, for example, guided by:

  • Information obtained from the assurance practitioner’s evaluation of the results of the procedures already performed;
  • The assurance practitioner’s updated understanding of the underlying subject matter and other engagement circumstances obtained throughout the course of the engagement; and
  • The assurance practitioner’s view on the persuasiveness of evidence needed to address the matter that causes the assurance practitioner to believe that the subject matter information may be materially misstated.

Accumulating Uncorrected Misstatements (Ref: Para. 5165)

A119

Uncorrected misstatements are accumulated during the engagement (see paragraph 51) for the purpose of evaluating whether, individually or in aggregate, they are material when forming the assurance practitioner’s conclusion.

Considerations When an Assurance Practitioner’s Expert Is Involved on the Engagement

Nature, Timing and Extent of Procedures (Ref: Para. 52)

A121

The following matters are often relevant when determining the nature, timing and extent of procedures with respect to the work of an assurance practitioner’s expert when some of the assurance work is performed by one or more assurance practitioner’s expert (see paragraph A70):

  1. The significance of that expert’s work in the context of the engagement (see also paragraphs A122–A123);
  2. The nature of the matter to which that expert’s work relates;
  3. The risks of material misstatement in the matter to which that expert’s work relates;
  4. The assurance practitioner’s knowledge of and experience with previous work performed by that expert; and
  5. Whether that expert is subject to the assurance practitioner’s firm’s quality control policies and procedures (see also paragraphs A124–A125).

Integrating the work of an assurance practitioner’s expert

A123

As noted in paragraph A71, when the work of an assurance practitioner’s expert is to be used, it may be appropriate to perform some of the procedures required by paragraph 52 at the engagement acceptance or continuance stage.  This is particularly so when the work of the assurance practitioner’s expert will be fully integrated with the work of other assurance personnel and when the work of the assurance practitioner’s expert is to be used in the early stages of the engagement, for example during initial planning and risk assessment.

The assurance practitioner’s firm’s quality control policies and procedures

A125

Engagement teams are entitled to rely on the firm’s system of quality control, unless information provided by the firm or other parties suggests otherwise.  The extent of that reliance will vary with the circumstances, and may affect the nature, timing and extent of the assurance practitioner’s procedures with respect to such matters as:

  • Competence and capabilities, through recruitment and training programs.
  • The assurance practitioner’s evaluation of the objectivity of the assurance practitioner’s expert.  Assurance practitioner’s internal experts are subject to relevant ethical requirements, including those pertaining to independence.
  • The assurance practitioner’s evaluation of the adequacy of the assurance practitioner’s expert’s work.  For example, the firm’s training programs may provide the assurance practitioner’s internal experts with an appropriate understanding of the interrelationship of their expertise with the evidence gathering process.  Reliance on such training and other firm processes, such as protocols for scoping the work of the assurance practitioner’s internal experts, may affect the nature, timing and extent of the assurance practitioner’s procedures to evaluate the adequacy of the assurance practitioner’s expert’s work.
  • Adherence to regulatory and legal requirements, through monitoring processes.
  • Agreement with the assurance practitioner’s expert.

Such reliance does not reduce the assurance practitioner’s responsibility to meet the requirements of this ASAE.

The Competence, Capabilities and Objectivity of the Assurance Practitioner’s Expert (Ref: Para. 52(a))

A126

Information regarding the competence, capabilities and objectivity of an assurance practitioner’s expert may come from a variety of sources, such as:

  • Personal experience with previous work of that expert.
  • Discussions with that expert.
  • Discussions with other assurance practitioners or others who are familiar with that expert’s work.
  • Knowledge of that expert’s qualifications, membership of a professional body or industry association, license to practice, or other forms of external recognition.
  • Published papers or books written by that expert.
  • The firm’s quality control policies and procedures (see also paragraphs A124–A125).

A127

While assurance practitioner’s experts do not require the same proficiency as the assurance practitioner in performing all aspects of an assurance engagement, an assurance practitioner’s expert whose work is used may need a sufficient understanding of relevant ASAEs to enable that expert to relate the work assigned to them to the engagement objective.

A128

The evaluation of the significance of threats to objectivity and of whether there is a need for safeguards may depend upon the role of the assurance practitioner’s expert and the significance of the expert’s work in the context of the engagement.  There may be some circumstances in which safeguards cannot reduce threats to an acceptable level, for example, if a proposed assurance practitioner’s expert is an individual who has played a significant role in preparing the subject matter information.

A129

When evaluating the objectivity of an assurance practitioner’s external expert, it may be relevant to:

  • Enquire of the appropriate party(ies) about any known interests or relationships that the appropriate party(ies) has with the assurance practitioner’s external expert that may affect that expert’s objectivity.
  • Discuss with that expert any applicable safeguards, including any professional requirements that apply to that expert, and evaluate whether the safeguards are adequate to reduce threats to an acceptable level.  Interests and relationships that it may be relevant to discuss with the assurance practitioner’s expert include:
    • Financial interests.
    • Business and personal relationships.
    • Provision of other services by the expert, including by the organisation in the case of an external expert that is an organisation.

In some cases, it may also be appropriate for the assurance practitioner to obtain a written representation from the assurance practitioner’s external expert about any interests or relationships with the appropriate party(ies) of which that expert is aware.

Obtaining an Understanding of the Field of Expertise of the Assurance Practitioner’s Expert (Ref: Para. 52(b))

A130

Having a sufficient understanding of the field of expertise of the assurance practitioner’s expert enables the assurance practitioner to:

  1. Agree with the assurance practitioner’s expert the nature, scope and objectives of that expert’s work for the assurance practitioner’s purposes; and
  2. Evaluate the adequacy of that work for the assurance practitioner’s purposes.

A131

Aspects of the assurance practitioner’s expert’s field relevant to the assurance practitioner’s understanding may include:

  • Whether that expert’s field has areas of specialty within it that are relevant to the engagement.
  • Whether any professional or other standards and regulatory or legal requirements apply.
  • What assumptions and methods, including models where applicable, are used by the assurance practitioner’s expert, and whether they are generally accepted within that expert’s field and appropriate in the circumstances of the engagement.
  • The nature of internal and external data or information the assurance practitioner’s expert uses.

Agreement with the Assurance Practitioner’s Expert (Ref: Para. 52(c))

A132

It may be appropriate for the assurance practitioner’s agreement with the assurance practitioner’s expert to also include matters such as the following:

  1. The respective roles and responsibilities of the assurance practitioner and that expert;
  2. The nature, timing and extent of communication between the assurance practitioner and that expert, including the form of any report to be provided by that expert; and
  3. The need for the assurance practitioner’s expert to observe confidentiality requirements.

A133

The matters noted in paragraph A125 may affect the level of detail and formality of the agreement between the assurance practitioner and the assurance practitioner’s expert, including whether it is appropriate that the agreement be in writing.  The agreement between the assurance practitioner and an assurance practitioner’s external expert is often in the form of an engagement letter.

Evaluating the Adequacy of the Assurance Practitioner’s Expert’s Work (Ref: Para. 52(d))

A134

The following matters may be relevant when evaluating the adequacy of the assurance practitioner’s expert’s work for the assurance practitioner’s purposes:

  1. The relevance and reasonableness of that expert’s findings or conclusions, and their consistency with other evidence;
  2. If that expert’s work involves use of significant assumptions and methods, the relevance and reasonableness of those assumptions and methods in the circumstances; and
  3. If that expert’s work involves the use of source data that is significant to that expert’s work, the relevance, completeness, and accuracy of that source data.

A135

If the assurance practitioner determines that the work of the assurance practitioner’s expert is not adequate for the assurance practitioner’s purposes, options available to the assurance practitioner include:

  1. Agreeing with that expert on the nature and extent of further work to be performed by that expert; or
  2. Performing additional procedures appropriate to the circumstances.

Work Performed by Another Assurance Practitioner, a Responsible Party’s or Measurer’s or Evaluator’s Expert or an Internal Auditor (Ref: Para. 53–55)

A136

While paragraphs A121–A135 have been written in the context of using work performed by an assurance practitioner’s expert, they may also provide helpful guidance with respect to using work performed by another assurance practitioner, a responsible party’s or measurer’s or evaluator’s expert, or an internal auditor.

Written Representations (Ref: Para. 56)

A138

Other written representations requested may include the following:

  • Whether the appropriate party(ies) believes the effects of uncorrected misstatements are immaterial, individually and in aggregate, to the subject matter information.  A summary of such items is ordinarily included in or attached to the written representation;
  • That significant assumptions used in making any material estimates are reasonable;
  • That the appropriate party(ies) has communicated to the assurance practitioner all deficiencies in internal control relevant to the engagement that are not clearly trivial and inconsequential of which the appropriate party(ies) is aware; and
  • When the responsible party is different from the measurer or evaluator, that the responsible party acknowledges responsibility for the underlying subject matter.

Requested Written Representations Not Provided or Not Reliable (Ref: Para. 60)

A140

Circumstances in which the assurance practitioner may not be able to obtain requested written representations include, for example, when:

  • The responsible party contracts a third party to perform the relevant measurement or evaluation and later engages the assurance practitioner to undertake an assurance engagement on the resultant subject matter information.  In some such cases, for example where the responsible party has an ongoing relationship with the measurer or evaluator, the responsible party may be able to arrange for the measurer or evaluator to provide requested written representations, or the responsible party may be in a position to provide such representations if the responsible party has a reasonable basis for doing so, but in other cases this may not be so.
  • An intended user engages the assurance practitioner to undertake an assurance engagement on publicly available information but does not have a relationship with the responsible party of the kind necessary to ensure that party responds to the assurance practitioner’s request for a written representation.
  • The assurance engagement is undertaken against the wishes of the measurer or evaluator.  This may be the case when, for example, the engagement is undertaken pursuant to a court order, or a public sector assurance practitioner is required by the legislature or other competent authority to undertake a particular engagement.

In these or similar circumstances, the assurance practitioner may not have access to the evidence needed to support the assurance practitioner’s conclusion.  If this is the case, paragraph 66 of this ASAE applies.

Subsequent Events

(Ref: Para. 61)

A142

As noted in paragraph 61, the assurance practitioner has no responsibility to perform any procedures regarding the subject matter information after the date of the assurance practitioner’s report.  However, if, after the date of the assurance practitioner’s report, a fact becomes known to the assurance practitioner that, had it been known to the assurance practitioner at the date of the assurance practitioner’s report, may have caused the assurance practitioner to amend the report, the assurance practitioner may need to discuss the matter with the appropriate party(ies) or take other action as appropriate in the circumstances.

Other Information

(Ref: Para. 62)

A143

Further actions that may be appropriate if the assurance practitioner identifies a material inconsistency or becomes aware of a material misstatement of fact include, for example:

  • Requesting the appropriate party(ies) to consult with a qualified third party, such as the appropriate party(ies)’s legal counsel.
  • Obtaining legal advice about the consequences of different courses of action.
  • Communicating with third parties (for example, a regulator).
  • Withholding the assurance report.
  • Withdrawing from the engagement, where withdrawal is possible under applicable law or regulation.
  • Describing the material inconsistency in the assurance report.

Description of Applicable Criteria

(Ref: Para. 63)

A145

A description that the subject matter information is prepared in accordance with particular applicable criteria is appropriate only if the subject matter information complies with all relevant requirements of those applicable criteria that are effective.

Forming the Assurance Conclusion

Sufficiency and Appropriateness of Evidence (Ref: Para. 12(i), 64)

A148

The sufficiency and appropriateness of evidence are interrelated.  Sufficiency is the measure of the quantity of evidence.  The quantity of evidence needed is affected by the risks of the subject matter information being materially misstated (the higher the risks, the more evidence is likely to be required) and also by the quality of such evidence (the higher the quality, the less may be required).  Obtaining more evidence, however, may not compensate for its poor quality.

A149

Appropriateness is the measure of the quality of evidence; that is, its relevance and its reliability in providing support for the assurance practitioner’s conclusion.  The reliability of evidence is influenced by its source and by its nature, and is dependent on the individual circumstances under which it is obtained.  Generalizations about the reliability of various kinds of evidence can be made; however, such generalizations are subject to important exceptions.  Even when evidence is obtained from sources external to the appropriate party(ies), circumstances may exist that could affect its reliability.  For example, evidence obtained from an external source may not be reliable if the source is not knowledgeable or objective.  While recognising that exceptions may exist, the following generalizations about the reliability of evidence may be useful:

  • Evidence is more reliable when it is obtained from sources outside the appropriate party(ies).
  • Evidence that is generated internally is more reliable when the related controls are effective.
  • Evidence obtained directly by the assurance practitioner (for example, observation of the application of a control) is more reliable than evidence obtained indirectly or by inference (for example, enquiry about the application of a control).
  • Evidence is more reliable when it exists in documentary form, whether paper, electronic, or other media (for example, a contemporaneously written record of a meeting is ordinarily more reliable than a subsequent oral representation of what was discussed).

A150

The assurance practitioner ordinarily obtains more assurance from consistent evidence obtained from different sources or of a different nature than from items of evidence considered individually.  In addition, obtaining evidence from different sources or of a different nature may indicate that an individual item of evidence is not reliable.  For example, corroborating information obtained from a source independent of the appropriate party(ies) may increase the assurance the assurance practitioner obtains from a representation from the appropriate party(ies).  Conversely, when evidence obtained from one source is inconsistent with that obtained from another, the assurance practitioner determines what additional procedures are necessary to resolve the inconsistency.

A151

In terms of obtaining sufficient appropriate evidence, it is generally more difficult to obtain assurance about subject matter information covering a period than about subject matter information at a point in time.  In addition, conclusions provided on processes ordinarily are limited to the period covered by the engagement; the assurance practitioner provides no conclusion about whether the process will continue to function in the specified manner in the future.

A152

Whether sufficient appropriate evidence has been obtained on which to base the assurance practitioner’s conclusion is a matter of professional judgement.

A153

In some circumstances, the assurance practitioner may not have obtained the sufficiency or appropriateness of evidence that the assurance practitioner had expected to obtain through the planned procedures.  In these circumstances, the assurance practitioner considers that the evidence obtained from the procedures performed is not sufficient and appropriate to be able to form a conclusion on the subject matter information.  The assurance practitioner may:

  • Extend the work performed; or
  • Perform other procedures judged by the assurance practitioner to be necessary in the circumstances.

Where neither of these is practicable in the circumstances, the assurance practitioner will not be able to obtain sufficient appropriate evidence to be able to form a conclusion.  This situation may arise even though the assurance practitioner has not become aware of a matter(s) that causes the assurance practitioner to believe the subject matter information may be materially misstated, as addressed in paragraph 49L.

Evaluating the Sufficiency and Appropriateness of Evidence (Ref: Para. 65)

A154

An assurance engagement is a cumulative and iterative process.  As the assurance practitioner performs planned procedures, the evidence obtained may cause the assurance practitioner to change the nature, timing or extent of other planned procedures.  Information may come to the assurance practitioner’s attention that differs significantly from that expected and upon which planned procedures were based.  For example:

  • The extent of misstatements that the assurance practitioner identifies may alter the assurance practitioner’s professional judgement about the reliability of particular sources of information.
  • The assurance practitioner may become aware of discrepancies in relevant information, or inconsistent or missing evidence.
  • If analytical procedures were performed towards the end of the engagement, the results of those procedures may indicate a previously unrecognised risk of material misstatement.

In such circumstances, the assurance practitioner may need to re‑evaluate the planned procedures.

A155

The assurance practitioner’s professional judgement as to what constitutes sufficient appropriate evidence is influenced by such factors as the following:

  • Significance of a potential misstatement and the likelihood of its having a material effect, individually or when aggregated with other potential misstatements, on the subject matter information.
  • Effectiveness of the appropriate party(ies)’s responses to address the known risk of material misstatement.
  • Experience gained during previous assurance engagements with respect to similar potential misstatements.
  • Results of procedures performed, including whether such procedures identified specific misstatements.
  • Source and reliability of the available information.
  • Persuasiveness of the evidence.
  • Understanding of the appropriate party(ies) and its environment.

Scope Limitations (Ref: Para. 26, 66)

A156

A scope limitation may arise from:

  1. Circumstances beyond the control of the appropriate party(ies).  For example, documentation the assurance practitioner considers it necessary to inspect may have been accidentally destroyed;
  2. Circumstances relating to the nature or timing of the assurance practitioner’s work.  For example, a physical process the assurance practitioner considers it necessary to observe may have occurred before the assurance practitioner’s engagement; or
  3. Limitations imposed by the responsible party, the measurer or evaluator, or the engaging party on the assurance practitioner who, for example, may prevent the assurance practitioner from performing a procedure the assurance practitioner considers to be necessary in the circumstances.  Limitations of this kind may have other implications for the engagement, such as for the assurance practitioner’s consideration of engagement risk and engagement acceptance and continuance.

A157

An inability to perform a specific procedure does not constitute a scope limitation if the assurance practitioner is able to obtain sufficient appropriate evidence by performing alternative procedures.

 

Preparing the Assurance Report

Form of Assurance Report (Ref: Para. 67–68)

A160

This ASAE does not require a standardised format for reporting on all assurance engagements.  Instead it identifies the basic elements the assurance report is to include.  Assurance reports are tailored to the specific engagement circumstances.  The assurance practitioner may use headings, paragraph numbers, typographical devices, for example the bolding of text, and other mechanisms to enhance the clarity and readability of the assurance report.

A161

The assurance practitioner may choose a “short form” or “long form” style of reporting to facilitate effective communication to the intended users.  “Short‑form” reports ordinarily include only the basic elements.  “Long‑form” reports include other information and explanations that are not intended to affect the assurance practitioner’s conclusion.  In addition to the basic elements, long‑form reports may describe in detail the terms of the engagement, the applicable criteria being used, findings relating to particular aspects of the engagement, details of the qualifications and experience of the assurance practitioner and others involved with the engagement, disclosure of materiality levels, and, in some cases, recommendations.  The assurance practitioner may find it helpful to consider the significance of providing such information to the information needs of the intended users.  As required by paragraph 68, additional information is clearly separated from the assurance practitioner’s conclusion and phrased in such a manner so as to make it clear that it is not intended to detract from that conclusion.

Assurance Report Content

Title (Ref: Para. 69(a))

Addressee (Ref: Para. 69(b))

Subject Matter Information and Underlying Subject Matter (Ref: Para. 69(c))

A164

Identification and description of the subject matter information and, when appropriate, the underlying subject matter may include, for example:

  • The point in time or period of time to which the measurement or evaluation of the underlying subject matter relates.
  • Where applicable, the name of the responsible party or component of the responsible party to which the underlying subject matter relates.
  • An explanation of those characteristics of the underlying subject matter or the subject matter information of which the intended users should be aware, and how such characteristics may influence the precision of the measurement or evaluation of the underlying subject matter against the applicable criteria, or the persuasiveness of available evidence.  For example:
    • The degree to which the subject matter information is qualitative versus quantitative, objective versus subjective, or historical versus prospective.
    • Changes in the underlying subject matter or other engagement circumstances that affect the comparability of the subject matter information from one period to the next.

Applicable Criteria (Ref: Para. 69(d))

A165

The assurance report identifies the applicable criteria against which the underlying subject matter was measured or evaluated so the intended users can understand the basis for the assurance practitioner’s conclusion.  The assurance report may include the applicable criteria, or refer to them if they are included in the subject matter information or if they are otherwise available from a readily accessible source.  It may be relevant in the circumstances, to disclose:

  • The source of the applicable criteria, and whether or not the applicable criteria are embodied in law or regulation, or issued by authorised or recognised bodies of experts that follow a transparent due process, that is, whether they are established criteria in the context of the underlying subject matter (and if they are not, a description of why they are considered suitable).
  • Measurement or evaluation methods used when the applicable criteria allow for choice between a number of methods.
  • Any significant interpretations made in applying the applicable criteria in the engagement circumstances.
  • Whether there have been any changes in the measurement or evaluation methods used.

Inherent Limitations (Ref: Para. 69(e))

Specific Purpose (Ref: Para. 69(f))

A168

In addition to the alert required by paragraph 69(f), the assurance practitioner may consider it appropriate to indicate that the assurance report is intended solely for specific users.  Depending on the engagement circumstances, for example, the law or regulation of the particular jurisdiction, this may be achieved by restricting the distribution or use of the assurance report.  While an assurance report may be restricted in this way, the absence of a restriction regarding a particular user or purpose does not itself indicate that a legal responsibility is owed by the assurance practitioner in relation to that user or for that purpose.  Whether a legal responsibility is owed will depend on the legal circumstances of each case and the relevant jurisdiction.

Relative Responsibilities (Ref: Para. 69(g))

Performance of the Engagement in Accordance with ASAE 3000 and a Subject Matter Specific ASAE (Ref: Para. 69(h))

Applicable Quality Control Requirements (Ref: Para. 69(i))

A172

The following is an illustration of a statement in the assurance report regarding applicable quality control requirements:

The firm applies Australian Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. 

Compliance with Independence and Other Ethical Requirements (Ref: Para. 69(j))

A173

The following is an illustration of a statement in the assurance report regarding compliance with ethical requirements:

We have complied with the independence and other relevant ethical requirements relating to assurance engagements, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Summary of the Work Performed (Ref: Para. A6, 69(k))

A175

Where no specific ASAE provides guidance on procedures for a particular underlying subject matter, the summary might include a more detailed description of the work performed.  It may be appropriate to include in the summary a statement that the work performed included evaluating the suitability of the applicable criteria.

A176

In a limited assurance engagement the summary of the work performed is ordinarily more detailed than for a reasonable assurance engagement and identifies the limitations on the nature, timing, and extent of procedures.  This is because an appreciation of the nature, timing, and extent of procedures performed is essential to understanding a conclusion expressed in a form that conveys whether, based on the procedures performed, a material matter(s) has come to the assurance practitioner’s attention to cause the assurance practitioner to believe the subject matter information is materially misstated.  It also may be appropriate to indicate in the summary of the work performed certain procedures that were not performed that would ordinarily be expected to be performed in a reasonable assurance engagement.  However, a complete identification of all such procedures may not be possible because the assurance practitioner’s required understanding and consideration of engagement risk is less than in a reasonable assurance engagement.

A177

Factors to consider in determining the level of detail to be provided in the summary of the work performed may include:

  • Circumstances specific to the entity (e.g., the differing nature of the entity’s activities compared to those typical in the sector).
  • Specific engagement circumstances affecting the nature and extent of the procedures performed.
  • The intended users’ expectations of the level of detail to be provided in the report, based on market practice, or applicable law or regulation.

The Assurance Practitioner’s Conclusion (Ref: Para. 12(a)(i)a, 69(l))

A179

Examples of conclusions expressed in a form appropriate for a reasonable assurance engagement include:

  • When expressed in terms of the underlying subject matter and the applicable criteria,  “In our opinion, the entity has complied, in all material respects, with XYZ law”;
  • When expressed in terms of the subject matter information and the applicable criteria, “In our opinion, the forecast of the entity’s financial performance is properly prepared, in all material respects, based on XYZ criteria”; or
  • When expressed in terms of a statement made by the appropriate party, “In our opinion, the [appropriate party’s] statement that the entity has complied with XYZ law is, in all material respects, fairly stated,” or “In our opinion, the [appropriate party’s] statement that the key performance indicators are presented in accordance with XYZ criteria is, in all material respects, fairly stated”.

A181

Examples of conclusions expressed in a form appropriate for a limited assurance engagement include:

  • When expressed in terms of the underlying subject matter and the applicable criteria, “Based on the procedures performed and evidence obtained, nothing has come to our attention that causes us to believe that [the entity] has not complied, in all material respects, with XYZ law.”
  • When expressed in terms of the subject matter information and the applicable criteria, “Based on the procedures performed and evidence obtained, we are not aware of any material amendments that need to be made to the assessment of key performance indicators for them to be in accordance with XYZ criteria.”
  • When expressed in terms of a statement made by the appropriate party, “Based on the procedures performed and evidence obtained, nothing has come to our attention that causes us to believe that the [appropriate party’s] statement that [the entity] has complied with XYZ law, is not, in all material respects, fairly stated.”

A182

Forms of expression which may be useful for underlying subject matters include, for example, one, or a combination of, the following:

  • For compliance engagements—“in compliance with” or “in accordance with.”
  • For engagements when the applicable criteria describe a process or methodology for the preparation or presentation of the subject matter information—“properly prepared.”
  • For engagement when the principles of fair presentation are embodied in the applicable criteria—“fairly stated.”

The Assurance Practitioner’s Signature (Ref: Para. 69(m))

Date (Ref: Para. 69(n))

Reference to the Assurance Practitioner’s Expert in the Assurance Report (Ref: Para. 70)

A187

Nonetheless, the assurance practitioner has sole responsibility for the conclusion expressed, and that responsibility is not reduced by the assurance practitioner’s use of the work of an assurance practitioner’s expert.  It is important therefore that if the assurance report refers to an assurance practitioner’s expert, that the wording of that report does not imply that the assurance practitioner’s responsibility for the conclusion expressed is reduced because of the involvement of that expert.

Unmodified and Modified Conclusions

(Ref: Para. 74–77, Appendix 1)

A189

The term ‘pervasive’ describes the effects on the subject matter information of misstatements or the possible effects on the subject matter information of misstatements, if any, that are undetected due to an inability to obtain sufficient appropriate evidence.  Pervasive effects on the subject matter information are those that, in the assurance practitioner’s professional judgement:

  1. Are not confined to specific aspects of the subject matter information;
  2. If so confined, represent or could represent a substantial proportion of the subject matter information; or
  3. In relation to disclosures, are fundamental to the intended users’ understanding of the subject matter information.

A191

Examples of qualified and adverse conclusions and a disclaimer of conclusion are:

  • Qualified conclusion (an example for limited assurance engagements with a material misstatement) – “Based on the procedures performed and the evidence obtained, except for the effect of the matter described in the Basis for Qualified Conclusion section of our report, nothing has come to our attention that causes us to believe that the [appropriate party’s] statement does not present fairly, in all material respects, the entity’s compliance with XYZ law.”
  • Adverse conclusion (an example for a material and pervasive misstatement for both reasonable assurance and limited assurance engagements) – “Because of the significance of the matter described in the Basis for Adverse Conclusion section of our report, the [appropriate party’s] statement does not present fairly the entity’s compliance with XYZ law.”
  • Disclaimer of conclusion (an example for a material and pervasive limitation of scope for both reasonable assurance and limited assurance engagements) – “Because of the significance of the matter described in the Basis for Disclaimer of Conclusion section of our report, we have not been able to obtain sufficient appropriate evidence to form a conclusion on the [appropriate party’s] statement.  Accordingly, we do not express a conclusion on that statement.”

A192

In some cases, the measurer or evaluator may identify and properly describe that the subject matter information is materially misstated.  For example, in a compliance engagement the measurer or evaluator may correctly describe the instances of non‑compliance.  In such circumstances, paragraph 76 requires the assurance practitioner to draw the intended users’ attention to the description of the material misstatement, by either expressing a qualified or adverse conclusion or by expressing an unqualified conclusion but emphasizing the matter by specifically referring to it in the assurance report.

Other Communication Responsibilities

(Ref: Para. 78)

Communication with Management and Those Charged with Governance

A194

Relevant ethical requirements may include a requirement to report identified or suspected non‑compliance with laws and regulations to an appropriate level of management or those charged with governance. In some jurisdictions, law or regulation may restrict the assurance practitioner’s communication of certain matters with the responsible party, management or those charged with governance.  Law or regulation may specifically prohibit a communication, or other action, that might prejudice an investigation by an appropriate authority into an actual, or suspected, illegal act, including alerting the entity, for example, when the assurance practitioner is required to report the identified or suspected non‑compliance to an appropriate authority pursuant to anti‑money laundering legislation. In these circumstances, the issues considered by the assurance practitioner may be complex and the assurance practitioner may consider it appropriate to obtain legal advice.

Reporting of Identified or Suspected Non‑Compliance with Laws and Regulations to an Appropriate Authority outside the Entity

A195

Law, regulation or relevant ethical requirements may:

  1. Require the assurance practitioner to report identified or suspected non‑compliance with laws and regulations to an appropriate authority outside the entity. 
  2. Establish responsibilities under which reporting to an appropriate authority outside the entity may be appropriate in the circumstances.[8]

A196

Reporting identified or suspected non‑compliance with laws and regulations to an appropriate authority outside the entity may be required or appropriate in the circumstances because:

  1. Law, regulation or relevant ethical requirements require the assurance practitioner to report;
  2. The assurance practitioner has determined reporting is an appropriate action to respond to identified or suspected non‑compliance in accordance with relevant ethical requirements; or
  3. Law, regulation or relevant ethical requirements provide the assurance practitioner with the right to do so.

A197

The reporting of identified or suspected non‑compliance with laws and regulations in accordance with law, regulation or relevant ethical requirements may include non‑compliance with laws and regulations that the assurance practitioner comes across or is made aware of when performing the engagement but which may not affect the subject matter information.  Under this ASAE, the assurance practitioner is not expected to have a level of understanding of laws and regulations beyond those affecting the subject matter information.  However, law, regulation or relevant ethical requirements may expect the assurance practitioner to apply knowledge, professional judgement and expertise in responding to such non‑compliance.  Whether an act constitutes actual non‑compliance is ultimately a matter to be determined by a court or other appropriate adjudicative body.

A198

In some circumstances, the reporting of identified or suspected non‑compliance with laws and regulations to an appropriate authority outside the entity may be precluded by the assurance practitioner’s duty of confidentiality under law, regulation, or relevant ethical requirements.  In other cases, reporting identified or suspected non‑compliance to an appropriate authority outside the entity would not be considered a breach of the duty of confidentiality under the relevant ethical requirements.[9]

Documentation

(Ref: Para. 79–83)

A201

It is neither necessary nor practical to document every matter considered, or professional judgement made, during an engagement.  Further, it is unnecessary for the assurance practitioner to document separately (as in a checklist, for example) compliance with matters for which compliance is demonstrated by documents included within the engagement file.  Similarly, the assurance practitioner need not include in engagement file superseded drafts of working papers, notes that reflect incomplete or preliminary thinking, previous copies of documents corrected for typographical or other errors, and duplicates of documents.

A202

In applying professional judgement to assessing the extent of documentation to be prepared and retained, the assurance practitioner may consider what is necessary to provide an understanding of the work performed and the basis of the principal decisions taken (but not the detailed aspects of the engagement) to another assurance practitioner who has no previous experience with the engagement.  That other assurance practitioner may only be able to obtain an understanding of detailed aspects of the engagement by discussing them with the assurance practitioner who prepared the documentation.

A203

Documentation may include a record of, for example:

  • The identifying characteristics of the specific items or matters tested;
  • Who performed the engagement work and the date such work was completed; and
  • Who reviewed the engagement work performed and the date and extent of such review.
  • Discussions of significant matters with the appropriate party(ies) and others, including the nature of the significant matters discussed and when and with whom the discussions took place.

A204

Documentation may include a record of, for example:

  • Issues identified with respect to compliance with relevant ethical requirements and how they were resolved.
  • Conclusions on compliance with independence requirements that apply to the engagement, and any relevant discussions with the firm that support these conclusions.
  • Conclusions reached regarding the acceptance and continuance of client relationships and assurance engagements.
  • The nature and scope of, and conclusions resulting from, consultations undertaken during the course of the engagement.

Assembly of the Final Engagement File

A205

ASQC 1 requires firms to establish policies and procedures for the timely completion of the assembly of engagement files.[11]  An appropriate time limit within which to complete the assembly of the final engagement file is ordinarily not more than 60 days after the date of the assurance report.[12]

A206

The completion of the assembly of the final engagement file after the date of the assurance report is an administrative process that does not involve the performance of new procedures or the drawing of new conclusions.  Changes may, however, be made to the documentation during the final assembly process if they are administrative in nature.  Examples of such changes include:

  • Deleting or discarding superseded documentation.
  • Sorting, collating and cross‑referencing working papers.
  • Signing off on completion checklists relating to the file assembly process.
  • Documenting evidence that the assurance practitioner has obtained, discussed and agreed with the relevant members of the engagement team before the date of the assurance report.

A207

ASQC 1 requires firms to establish policies and procedures for the retention of engagement documentation.[13]  The retention period for assurance engagements ordinarily is no shorter than five years from the date of the assurance report.[14]

3

This ASAE contains requirements and application and other explanatory material specific to reasonable and limited assurance attestation engagements.  This ASAE may also be applied to reasonable and limited assurance direct engagements, adapted and supplemented as necessary in the engagement circumstances.

*_4

See ASA 102.

#_2

See ASA 102.

*_5

See ASA 102.

#_3

See ASA 102.

*_6

See ASA 102.

4

[Deleted by the AUASB.  Refer footnote[*].]

5

See ASQC 1, paragraph 26.

6

See ASQC 1, paragraph 33.

7

See, for example, Sections 225.44–225.48 of APES 110 Code of Ethics for Professional Accountants.

8

See, for example, Section 225.51 to 225.52 of the APES 110 Code of Ethics for Professional Accountants.

9

See, for example, Section 140.7 and Section 225.53 of the APES 110 Code of Ethics for Professional Accountants.

10

See, for example, Section 225.55 of the APES 110 Code of Ethics for Professional Accountants.

11

See ASQC 1, paragraph 45.

12

See ASQC 1, paragraph A54.

13

See ASQC 1, paragraph 47.

14

See ASQC 1, paragraph A61.

Roles and Responsibilities

Appendix1

Download Appendix 1

 

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