Auditing, Attestation, and Assurance Paper
Auditing, Attestation, and Assurance Service Paper
December 10, 2012
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Auditing, Attestation, and Assurance Service Paper
In this paper Team D will compare and contrast auditing, attestation, and assurance services. Team D will provide an example of each type of service. They will also identify who would request each of the three services. Additionally, team D will discuss what standards apply to each of the services and what governing body establishes those standards.
Example of each service
Attestation services provide written conclusion that certify the reliability of the written information that is to be provided to third parties. An example of an attestation service is a third-party firm providing a company with a report that will verify the effectiveness of the elements of their internal control systems.? Assurance services improve the quality of the written information that is provided to third party decision makers.? A CPA examining the terms of an available loan to ensure that it is accurate and appropriate is an assurance service.? Auditing services evaluate the written information for accuracy, reliability, and honesty.? A third party firm assessing financial statements of a corporation to ensure that the information is honest, correct, and intelligible is an auditing service. The written report of this audit would be considered an attestation service.
Who would request these services
Requesting such an extensive and sometimes costly service is usually requested from sources such as upper management of a company, government agencies such as the IRS, the New York Stock Exchange, shareholders, and stockholders. These services are requested either because of a scheduled review, possibly annually or bi-annually, or because there are suspicions of fraudulent records or management. The greatest examples that everyone can learn from are the ENRON and WorldCom scandals that shocked the nation back in 2002, costing investors billions of dollars. For WorldCom, it all started with one wrongly fired employee, a newspaper article, and the internal auditing department. In this situation, the internal auditing team took it upon themselves to investigate what started out as a minor problem.
Anyone is allowed to leave a tip or complaint on the SEC website http://www.sec.gov/complaint/select.shtml if they suspect anything or have any questions. The SEC requires all public companies to have an audit performed, so they keep track of all statements dealing with those audits. Some companies will offer this information on their website as well. PepsiCo, although slightly challenging to find, has a posted copy of the results for their audit signed and vouched for in 2002 (“Independent Auditors Report”,? 2012).
Not all request for audits are made to public companies. Government entities can be audited as well. For instance, local residents of the state of Minnesota can request an audit of the state, counties, and local governments. An audit can also be required because of a mandated statute. However, when citizens request an audit, a signed petition by a certain number of residents is required to get the process started (“Minnesota Office of the State Auditor”,? 2012). Most, if not all states will have similar requirements. Each state may have their own requirements as to how many residence it will take to request an audit, time frame and forms to approve such a request, length in time it takes to carry out such request, and so on. This type of information can be found in either the state website or a good Google search.
Standards and Governing Body
An assurance is the broadest of the three being discussed: assurance, attestation and audit. An assurance is classified in levels: Audit or examination-level, review level, agreed upon procedures and no assurance. These basically provide a written assurance of the companies??™ financials. Assurances were developed by the CPA profession and follows GAAP in their practices. The AICPA clearly defines how the assurance relates to the auditor and process itself. Writing these assurances allows a CPA to build a reputation for how well or accurate they have written an assurance.
There are a total of 11 attestation standards: five general standards, two standards of fieldwork and four standards of reporting. The five general standards cover the auditors or practitioner??™s ability. The two standards of fieldwork provide the minimal needed for the report. The four standards of reporting cover any assertions, restriction, conclusions and/or reservation by the practitioner??™s. Attestations are governed PCAOB, according to SOX section 103. The ASB also closely monitors standards set for attestations as well.
There are three types of audits: Financial Statements, Compliance, and Operational. An audit of financial statements is usually conduction internally and externally following GAAP. This information is available to all and is an extensive review of a company??™s financial statements. A Compliance audit is to ensure that the company is in compliance with rules, regulations or conditions set forth. Most companies use a dual purpose audit as defined by SOX. An operational audit is usually conducted for management level and performance activities. They would need someone from the industry with lots of expertise to have good evaluation on the performance of the company. At some point a CPA would also conduct this following the same guidelines.
Auditing, attestation, and assurance all provide different services to clients. Auditing services provide review of financial statements for accuracy and compliance, where attestation services only provide a review of a third parties work. Assurance services improve the quality of the information being passed on to decision makers. These services can be requested by any number of stakeholders. Management may request these services to help make decisions about objectives of the company. Government agencies may request these services as a way to ensure compliance with laws and standards. Investors and creditors may request these services as a way to make decisions about investments and loans. Auditors use GAAP when providing assurance services, however AICPA has defined how assurance relates to the auditor. PCOAB is the governing body that has defined the 11 attestation standards. There are several other governing bodies that make up the standards that all auditors must follow when providing services.
Independent Auditors Report.? (2012).? Retrieved from http://www.pepsico.com/Annual-Reports/2001/ind_auditors_report.html
Minnesota Office of the State Auditor.? (2012).? Retrieved from http://www.auditor.state.mn.us/default.aspxpage=20040809.001