Exam 18: Audit and Assurance Services

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a. Attestation is a special form of assurance engagement. In order to meet the criteria of an attest engagement, the reporting party has to make a written assertion about the subject matter of interest, the attestation report must apply only to the reliability of the written assertion (not the relevance), and the report must be in writing.
b. Four basic conditions distinguish an attest engagement from other assurance services:
i) There must be an assertion being made by one party, the accuracy of which is of interest to another party. This assertion may be quantitative or qualitative in nature.
ii) Objective criteria must exist that can be utilized to assess the accuracy of the assertion. All parties must agree as to how the assertion is to be evaluated using a common unit of measure and measurement technology.
iii) The assertion must be amenable to verification by an independent party. That is, the accountant must be able to obtain adequate, diagnostic evidence to support or refute the assertion being made.
iv) The public accountant should prepare a written conclusion about the accuracy of the assertion(s).

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a. In a compilation, the public accountants are hired to draft financial statements based on information provided by the organization. A compilation involves collecting, classifying, and summarizing financial information, that is, basic bookkeeping and financial report preparation.
b. This type of engagement is technically not an assurance engagement because the public accountant does not provide an opinion on the quality of the information. No audit procedures are performed-the client is engaging the accountant's accounting expertise rather than his or her audit expertise. The public accountant is required to disclose errors or omissions that come to his or her attention but is not under any duty to search for such problems. The accountant always disclaims an opinion on compiled financial statements.
c. The standards applicable to compilation engagements are covered in the AICPA's Statements on Standards for Accounting and Review Services and international standards are covered in the IAASB's International Standard on Related Services Engagements to Compile Financial Statements.

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Trust Services are based on five principles.
i) Security is concerned with whether the systems are protected against unauthorized access.
ii) Privacy deals with whether the customers' private information is handled appropriately.
iii) Processing integrity considers if transactions are processed properly.
iv) Availability addresses whether systems are available for operation and use.
v) Confidentiality deals with the handling of customers' confidential information.