Describe an assurance service engagement. Define an attest engagement. Is an audit engagement an attest engagement? Identify at least three attest services.
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An assurance service engagement refers to an engagement where a professional accountant or auditor provides an independent assessment or examination of a subject matter, with the objective of providing public assurance on the reliability or credibility of that subject matter. The subject matter can be financial statements, internal controls, performance measures, compliance with laws and regulations, sustainability reports, cyber risk management, and many other areas.
On the other hand, an attest engagement refers to a type of assurance engagement where a professional accountant or auditor provides a written report stating their conclusion about the reliability of a written assertion that is the responsibility of another party. In an attest engagement, the accountant evaluates the evidence and supports or disputes the assertion made by the responsible party.
An audit engagement is indeed an example of an attest engagement. In an audit engagement, an independent auditor provides an opinion on whether the financial statements of an entity are presented fairly, in all material respects, in accordance with the applicable financial reporting framework such as International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP).
Three examples of attest services are:
1. Review Engagements: In a review engagement, an independent accountant performs inquiry and analytical procedures to obtain limited assurance on the financial statements. The objective is to provide a lower level of assurance than an audit, aiming to detect any material misstatements or anomalies. A review engagement report is issued.
2. Compilation Engagements: In a compilation engagement, a professional accountant assists in organizing and presenting financial information provided by the client without providing any assurance or opinion on material accuracy or completeness. The aim is to help organize financial statements in an appropriate format. A compilation report is issued.
3. Agreed-upon Procedures Engagements: In an agreed-upon procedures engagement, an independent accountant carries out specific procedures agreed upon by the engaging parties. The accountant's role is limited to performing the agreed-upon procedures and reporting the factual findings without offering an opinion. A report of factual findings is issued.
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