4 Other Attestation and Assurance Engagements Explained
Key Concepts
- Attestation Engagements
- Assurance Engagements
- Types of Attestation Engagements
- Types of Assurance Engagements
- Objective of Attestation and Assurance Engagements
- Standards and Guidelines
Attestation Engagements
Attestation engagements involve an auditor providing a formal opinion on the reliability of a written assertion made by another party. These engagements are typically performed on financial or non-financial information and are governed by specific standards and guidelines.
Example: An auditor may provide an opinion on the effectiveness of a company's internal controls over financial reporting, as required by the Sarbanes-Oxley Act.
Assurance Engagements
Assurance engagements are broader than attestation engagements and involve providing a level of assurance on any subject matter that is the responsibility of another party. This can include financial and non-financial information, as well as processes and systems.
Example: An auditor may provide assurance on the sustainability reporting of a company, evaluating the accuracy and completeness of the reported environmental and social metrics.
Types of Attestation Engagements
There are several types of attestation engagements, including:
- Audit of Historical Financial Information: Providing an opinion on the financial statements of an entity.
- Review of Historical Financial Information: Providing limited assurance on the financial statements through analytical procedures.
- Agreed-Upon Procedures: Performing specific procedures as agreed upon by the auditor and the client, without providing an opinion.
- Compliance Attestation: Providing an opinion on whether an entity has complied with specified requirements.
Types of Assurance Engagements
Assurance engagements can be categorized into:
- Financial Assurance: Providing assurance on financial information, such as financial statements and forecasts.
- Non-Financial Assurance: Providing assurance on non-financial information, such as sustainability reports and internal controls.
- Process and System Assurance: Providing assurance on processes and systems, such as IT systems and supply chain management.
Objective of Attestation and Assurance Engagements
The primary objective of attestation and assurance engagements is to enhance the degree of confidence of intended users in the information provided by the responsible party. This is achieved by providing a professional opinion on the reliability and accuracy of the information.
Example: The objective of a compliance attestation is to provide confidence to stakeholders that the entity has adhered to regulatory requirements.
Standards and Guidelines
Attestation and assurance engagements are governed by various standards and guidelines, including:
- AICPA Statements on Standards for Attestation Engagements (SSAE): Provide guidance on performing attestation engagements.
- International Standard on Assurance Engagements (ISAE): Provide guidance on performing assurance engagements under international standards.
- COSO Framework: Provides a framework for evaluating internal controls.
Examples and Analogies
Consider attestation engagements as "third-party certifications" that provide credibility to the assertions made by an entity. Just as a quality certification enhances the trust in a product, an attestation engagement enhances the trust in the information provided.
Assurance engagements are akin to "health check-ups" for various aspects of an entity. Just as a comprehensive health check provides assurance on the overall well-being of an individual, an assurance engagement provides assurance on the overall reliability of the entity's information and processes.