What is an assurance engagement? Name the five elements exhibited by all assurance elements.

Answer 1

An assurance engagement is a professional service performed by an auditor or assurer, with the aim of enhancing the reliability of information or assessing the compliance of a specified subject matter against a set of criteria. This type of engagement is typically conducted to provide users with an assurance that the subject matter is reliable and in accordance with the criteria.

The five elements exhibited by all assurance engagements are as follows:

1. Three party relationship: Assurance engagements involve three parties – the responsible party (the individual or organization who is responsible for the subject matter), the intended users (those who will use the assurance report and rely on the information), and the practitioner (the auditor or assurer conducting the engagement).

2. Subject matter: There must be a defined subject matter, which refers to the information being evaluated or assessed. This could be financial statements, internal controls, sustainability reports, cybersecurity measures, or any other aspect of an organization's operations.

3. Criteria: Assurance engagements require the existence of suitable criteria against which the subject matter can be assessed. The criteria act as a benchmark or standard for evaluating the subject matter. These criteria could be legal requirements, industry best practices, accounting standards, or any other applicable standards.

4. Sufficient evidence: The assurer must gather sufficient appropriate evidence to support their conclusion. This involves obtaining and evaluating evidence to form a basis for providing reasonable assurance or limited assurance about the subject matter in question. The evidence can be in the form of documents, interviews, observations, calculations, or other means.

5. Assurance report: Finally, the assurer must provide a report that communicates the findings and conclusions of the assurance engagement to the intended users. This report typically includes the practitioner's opinion or conclusion regarding the subject matter, the criteria used, the evidence obtained, and any limitations or qualifications pertaining to the engagement.

These five elements are essential in all assurance engagements to ensure that the process is conducted in a systematic and reliable manner, providing users with confidence in the information they rely upon.