1. Chapter 20 Additional Assurance Services: Other Information
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2. Assurance Services
Independent professional services that “improve the quality of information, or its context, for decision makers”
Assurance service encompass attestation services but are broader
Attestation, a portion of assurance services, are restricted to examination, review or agreed-upon procedures engagements
Assurance services go beyond attestation, may involve analyzing data or putting them in a form to facilitate decision making
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3. Relationship Between Assurance and Attestation Figure 20.1
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4. Demand for Assurance Services
Reduce information risk for outside parties and enable the company to contract at more favorable terms
Information technology has significantly changed expectations of information users
New services being developed
Continuous auditing
Assurance on system reliability
Performed in accordance with Statement on Standards for Attestation Services
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5. Selected Characteristics of Assurance Services Figure 20.2
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6. Subject Matter Historical or prospective performance or condition
Physical characteristics
Historical events
Analyses
Systems or processes
Behavior
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7. Assertion
Declaration about whether the subject matter is presented in accordance with certain criteria.
Practitioners generally must obtain appropriate assertion about subject matter
Report can be on either
The assertion about the subject matter or
The subject matter itself
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8. Criteria Suitable Available Objective
Permit reasonable consistent measurements
Complete
Relevant
Available
Publicly available
Presented in a summary, the assertion or the practitioners’ report
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9. Relationships Among Terms Used in Attestation Engagements Figure 20.3
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10. Attestation Risk
Risk that practitioners will unknowingly fail to appropriately modify their report on subject matter that is materially misstated
Consists of
Inherent risk
Control risk
Detection risk
Materiality
Difficult because subject matter may not be financial
Determine likely needs of intended users
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11. Types of Attestation Engagements
Examinations
Highest level of assurance
Attestation risk at low level
Reviews
Limited or negative assurance
Attestation risk at moderate level
Agreed-upon procedures
Restricted use reports
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12. Examination Report Figure 20.4
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13. Review Report on Subject Matter Figure 20.5
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14. Assurance on Internal Control over Financial Reporting
Presented in Chapters 7 and 18.
Public companies—Performed as a part of the integrated audit covering financial statements and internal control.
Nonpublic Companies—Have the option of having a similar integrated audit.
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15. Prospective Financial Statements
Financial Forecasts
Information about the entity’s expected financial position, results of operations and cash flows
Financial Projection
Expected results, given one or more hypothetical assumptions
CPAs engaged to examine or perform agreed-upon procedures but no review
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16. Examinations of Prospective Financial Statements
Practitioners gather evidence relating to the client’s procedures for preparation of the statements
Evaluate the underlying assumptions
Obtain a written representation letter from the client
Evaluate whether statements are in conformity with AICPA guidelines
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17. Reporting on Prospective Financial Statements
Report on subject matter
States whether the statements are presented in conformity with AICPA guidelines
Whether underlying assumptions provide a reasonable basis for the statements
Does not vouch for the achievability of the forecast or projection
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18. Compliance
Types
1. Attesting to an entity’s compliance with specified requirements of laws, regulations, rules, contracts, or grants.
2. Attesting to the effectiveness of an entity’s internal control over compliance with specified requirements.
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19. Management’s Discussion and Analysis
Management required to provide narrative explanation of financial results as part of 10-K and 10-Q
Practitioner may examine or review
Objective to provide assurance on
(1) the presentation includes, in all material respects, the required elements of the rules and regulations adopted by the SEC;
(2) the historical financial amounts included in the presentation have been accurately derived, in all material respects, from the entity’s financial statements; and
(3) the underlying information, determinations, estimates, and assumptions of the entity provide a reasonable basis for the disclosures contained in the presentation.
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20. Trust Services
Intended to address user and preparer needs regarding issues of security, availability, processing integrity, online privacy and confidentiality within e-commerce and other systems
System consists of
Infrastructure
Software
People
Procedures
Data
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21. Trust Services
The practitioner (1) performs procedures to determine that management’s description of the system is fairly stated and (2) obtains evidence that the controls over the system are designed and operating effectively to meet the Trust Services Principles and Criteria—the suitable criteria required for an attest engagement
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22. Principles and Criteria
Principles 1. Security 2. Availability 3. Processing Integrity 4. Confidentiality 5. Privacy Criteria for each principle 1. Policies 2. Communications 3. Procedures 4. Monitoring
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23. Types of Trust Services Engagements
Examination or agreed-upon procedures
WebTrust
Assurance on electronic commerce systems
SysTrust
Assurance on any system
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24. Reporting on Trust Services
WebTrust and SysTrust reports are similar: Assurance is provided on management’s assertion relating to the principles
SysTrust reports may be on one or more of the five principles
Designed to incorporate a seal management process
Seal (logo) included on a client’s website as electronic representation of the report
Engagement must be updated at least annually to use the seal
Initial reporting period must be at least 2 months
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25. Service Organization Control (SOC) Reports
SOC 1: Restricted use reports on controls at a service organization relevant to a user entity’s internal control over financial reporting (presented earlier in Chapter 7).
SOC 2: Restricted use reports on controls at a service organization related to security, availability, processing integrity, confidentiality, and/or privacy.
SOC 3: General use SysTrust reports related to security, availability, processing integrity,
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26. PrimePlus/ElderCare Services
Financial
Goal setting, funding analysis, needs assessment
Nonfinancial
Interpersonal and interrelationship management
Management of interaction between service providers and client
Target market
Older clients of CPA
Children of older adults
Other professionals that deal with older adults
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27. XBRL
eXtensible Business Reporting Language is an international information format designed for business information.
Accounting profession is in process of developing guidance for CPAs to provide assurance on XBRL-Related Documents.
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28. Additional Future Assurance Services
Committees working on:
Health care performance measurement
This service provides assurance about the effectiveness of health care services provided by health maintenance organizations, hospitals, doctors, and other providers.
Continuous auditing
provides assurance using a series of reports provided simultaneously or shortly after the related information is released.
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