Chapter 4 Tut Solutions
Chapter 4 Tut Solutions
Chapter 4 Tut Solutions
Review questions
Auditors and accountants are sometimes called upon to provide assurance on various
types of financial and non-financial information that are produced for a particular
purpose or for a segment of stakeholders. This is the case because auditors and
accountants possess the expertise and credibility to undertake an independent
engagement and to perform tests and analysis in order to provide a required level of
assurance in relation to these reports. For example, special purpose financial reports
are produced for a particular purpose and involve financial analysis that is not
typically required in a general purpose financial report. In many instances, special
purpose financial reports are required to be audited, e.g., prospectuses.
The assurance engagement can consist of an outcome, a set of criteria and a subject
matter, and include all the assurance engagements where ASAs, ASREs and ASAEs
apply. A financial statement audit is a reasonable assurance engagement. A
sustainability assurance engagement based on a certain set of criteria is an example of
limited assurance engagement.
will be used to support a legal case. It is also likely than any report will include
recommendations to prevent similar problems arising in the future such as
improvements to internal controls.
For the purpose of identifying the type of fraud, the KPMG global profiles of a
fraudster report in 2016 cited a number of ways in which technology was used to
perpetrate frauds, including:
• creating false or misleading information in the accounting records
• providing false or misleading information via email or other messaging
platform
• abusing permissible access computer systems
• obtaining access to computer systems with permission.
Efficiency relates to getting the best use out of resources. Using resources more
efficiently can lead to reducing resources used without reducing outputs or increasing
outputs for the same resources input.
Compilation
Review
Opinion: The opinion will state that nothing has come to the practitioner’s attention to
suggest that the subject matter does not comply with the criteria. This is negative form
assurance and gives a lower level of comfort to the user than an audit.
Audit
Opinion: The opinion will state that in all material respects the subject matter
complies with the criteria. This is positive form assurance which clearly states to the
users that the subject matter is free from material error.
Procedures: The auditor will plan the nature, timing and extent of procedures to
provide sufficient and appropriate evidence to ensure that engagement risk is reduced
to an acceptably low level. These procedures include: (1) obtaining an understanding
of the engagement, (2) assessing risk, (3) responding to those assessed risk, (4)
performing procedures such as substantive tests and where necessary tests of the
effectiveness of internal controls, and (5) evaluating the evidence.
Required
For each of the above explain in detail the characteristics of each
item and the extent to which they differ from one another.
Reasonable assurance provides comfort that the subject matter is not materially
misstated. The level of work performed by the auditor will ensure that the risk of
Positive form opinion is a clear statement that the subject matter is or is not in
compliance with appropriate criteria.
Negative form opinion states that nothing has come to the attention to suggest that the
subject matter is not in compliance with the criteria.
General purpose financial reports (GPFR) are those prepared to meet the needs of a
wide range of users, normal annual financial reports are (GPFR).
Special purpose financial reports meet the needs of a specific user for a specific
purpose, for example a bank providing finance to a company might request
information to be provided in a particular way to meet their information needs.
Historical financial information relates to reporting events that have already occurred
and therefore evidence should be readily available to give some comfort as to the
veracity of the information.
Compliance engagements are those which give some comfort that the processes
carried out in an organisation are in compliance with some regulations, such as
legislation, contractual obligations or internal policies.
Performance engagements are designed to give an opinion on the economy, efficiency
and effectiveness of processes. The idea is to ensure that the organisation is achieving
its objectives, reducing waste and getting value for money.