Assurance Engagement And Background
Assurance
Assurance means self-belief. In assurance appointment, an assurance firm is engaged by one party to offer an opinion on a quantity of data that has been prepared by another party.
The opinion is an expression of assurance about the knowledge that has been reviewed.
It gives declaration to the revelry that hired the reassurance rigid that the knowledge are often relied on.
Assurance are often provided by audit:
This may be external audit, internal audit or a mixture of the 2 review.
If we clarify it with its backdrop and appropriate information.
Since the economic Revolution in 18th century, businessmen started forming Joint Stock Companies to try to to business.
In many situations, people that managed the business (called management and directors) were different from those that owned the business (called shareholders).
Administration and Directors had role of stewardship (i.e. they appear after the assets of the corporate and manage them on behalf of shareholders).
Or agent (i.e. they take action in agreement with directions of shareholders).
To judge the performance of management and directors, shareholders asked them to organize statements about financial performance.
And financial position of company (these statements are now called ‘financial statements’) and to supply them these statements.
Soon after, it had been recognized that financial statements prepared by managers/directors presented “best-view” of business.
Instead of “true-and-fair-view” thanks to some Incentive (e.g. bonus) or Pressure (e.g. fear of removal) faced by management.
Accordingly reliability of monetary statement was question.
To enhance the authority/self-belief/declaration on these financial statements.
An skilled personality (called declaration supplier or auditor) was hired by shareholders to validate monetary statements. This person:
1. Is independent of both managers/directors and shareholders.
2. Gives his report/opinion whether financial statements given true and fair view altogether material respects.
