What does assurance mean in accounting. The IAASB Pronouncement Manual Glossary of Terms defines assurance as an engagement in which a practitioner expresses a conclusion with the intent of increasing the degree of confidence of potential users other than the responsible party in the results of the assessment. or measurement of a subject matter against a criterion. As an example, an assurance job can be performed on financial statements, which were prepared under IFRS (criteria).
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The following are the elements of an assurance engagement:
There are two types of assurance work that a professional can develop:
-) Reasonable assurance contracts: those in which the objective is to reduce the risk of the auditor’s work (issue an erroneous opinion) to an acceptably low level, depending on the circumstances, as a basis for expressing a positive opinion on the financial statements . financial.
-) Limited assurance contracts: those in which the objective is to reduce the risk of the auditor’s work to an acceptable level, depending on the circumstances, as a basis for expressing a negative opinion on the financial statements.
An affirmation regarding the effectiveness of internal control is the result of applying a reference framework to evaluate the effectiveness of internal control, such as COSO1 or COCO2 (criteria), of a specific process (subject on which the work will be carried out). insurance).
Based on this framework, there are two types of assurance work that the Certified Public Accountant is permitted to perform reasonable security work and limited security work. The objective of the first is the reduction of risk to a low level in the Circumstances as a basis for positively expressing the conclusion of the Certified Public Accountant. The objective of the second is a reduction in the risk of the work to an acceptable level in the circumstances of the work; however, this risk is greater than that undertaken for reasonable assurance engagement, and thus provides a basis for the Chartered Accountant to issue a negative assertion to express his conclusion.
There are different jobs that do not correspond to assurance jobs (compilation of financial statements, consulting jobs, application of agreed procedures, among others), in which care must be taken not to use expressions such as: examination, audit or review, since they can generate confusion with the security provided by assurance jobs.
Matter on which the work will be carried out
The subject matter on which the work is to be carried out, and the information that is the subject of the work, can take many forms, for example:
Performance or financial conditions. For example, historical or prospective financial information, financial performance and cash flows, for which the information object of the work may be: recognition, measurement, presentation and disclosure in the financial statements.
Performance or non-financial conditions. For example, performance of an entity, for which the information object of the work can be the key indicators of efficiency and effectiveness.
Physical characteristics. For example, plant capacity, for which the information object of the work can be a document with specifications.
Systems and processes. For example, the internal control or information technology system of an entity, for which the information subject to the engagement may be the assertion of effectiveness.
Conduct. For example, corporate governance, regulatory compliance, human resources practices, etc., for which the information object of the work may be a statement of compliance or effectiveness.
Suitable criteria
Criteria are the benchmarks that are used to evaluate or measure the subject matter, including, where relevant, benchmarks for presentation and disclosure. Criteria can be formal; for example, in the preparation of financial statements, the criteria would be the FRS; when reporting on internal control, the criteria would be an established internal control benchmark or individual control objectives designed, specifically for the engagement, and when reporting on compliance, the criteria may be law, regulation, or contract applicable.
Appropriate criteria are required for a consistent reasonable evaluation or measurement of a matter on which the work is to be performed, within the context of professional judgment. Without the frame of reference that provides the proper criteria, any conclusion is open to individual interpretation and misunderstanding.
Appropriate criteria are context-sensitive, that is, relevant to the circumstances of the engagement, and have the following characteristics:
Relevance. Criteria contribute to conclusions that help users make decisions.
Integrity. Criteria are sufficiently comprehensive when relevant factors that could affect the conclusions in the context of the engagement circumstances are not omitted. The full criteria include, where relevant, benchmarks for presentation and disclosure.
Reliability. Criteria that, when used in similar circumstances by Chartered Accountants with a similar professional capacity, allow the evaluation or measurement of the reasonableness of the consistency of the matter on which the work will be performed, including, when relevant, the presentation and disclosure.
Neutrality. The criteria contribute to conclusions that are free from bias.
Comprehensibility. The criteria contribute to clear and comprehensive conclusions and are not subject to materially different interpretations.
Sufficient and appropriate evidence
The Chartered Accountant plans and performs an assurance engagement with an attitude of professional scepticism to obtain sufficient and appropriate evidence as to whether the information in the matter for which the engagement is to be performed is free from material error. The Certified Public Accountant considers the materiality, the risk of the work (risk of expressing an erroneous opinion or conclusion) and the quantity and quality of available evidence when planning and performing the work; in particular, when determining the nature, scope and timeliness of the procedures for obtaining evidence.
A Certified Public Accountant is associated with the matter on which the work will be carried out when he reports on the information object of the work or approves the use of his name in a professional manner with said matter. If the Public Accountant is not associated in this way, third parties cannot assume any responsibility for him. If the Chartered Accountant becomes aware that any involved party is misusing his or her name in association with the matter on which the work is to be performed, he or she should require that party to cease doing so. The Chartered Accountant will also consider what other strategies should be applied, such as informing any known third-party user of the inappropriate use of his name or seeking legal advice in this regard.
