What are the five elements of an assurance engagement?

The Five Elements of an Assurance Engagement

An assurance engagement involves five essential elements:

1. Three-Party Relationship

An assurance engagement involves three parties:

Key Facts

  1. Three-party relationship: An assurance engagement involves three parties – the practitioner (auditor), the responsible party (client), and the intended users (users of financial statements). The responsible party wants to demonstrate and communicate the trustworthiness of the subject matter, the assurance user needs to be able to trust the first party, and the assurance provider needs to be able to review the information provided by the first party.
  2. Subject matter: The subject matter refers to the specific aspects of the system, processes, product, organization, or person that the user requires information about to build justified trust. It could include accuracy, robustness, bias/fairness, societal and human rights impacts, privacy, security, management, and intended use.
  3. Suitable criteria: Criteria are mutually understood ways of assessing the trustworthiness of the subject matter. They determine what measures or standards are appropriate for assessing the subject matter and whether commonly accepted standards can be agreed upon.
  4. Sufficient and appropriate evidence: Gathering sufficient and appropriate evidence is necessary to assess the subject matter against the criteria. This evidence can be in the form of testing, review, or investigation.
  5. Conclusion/opinion: The practitioner expresses an opinion regarding the subject matter based on the evidence collected. This opinion is communicated through a written report.
  • The practitioner (auditor)
  • The responsible party (client)
  • The intended users (users of financial statements)

The responsible party seeks to demonstrate the trustworthiness of the subject matter, the assurance user needs to trust the responsible party, and the assurance provider needs to review the information provided by the responsible party.

2. Subject Matter

The subject matter refers to the specific aspects of the system, processes, product, organization, or person that the user requires information about to build justified trust. It could include accuracy, robustness, bias/fairness, societal and human rights impacts, privacy, security, management, and intended use.

3. Suitable Criteria

Criteria are mutually understood ways of assessing the trustworthiness of the subject matter. They determine what measures or standards are appropriate for assessing the subject matter and whether commonly accepted standards can be agreed upon.

4. Sufficient and Appropriate Evidence

Gathering sufficient and appropriate evidence is necessary to assess the subject matter against the criteria. This evidence can be in the form of testing, review, or investigation.

5. Conclusion/Opinion

The practitioner expresses an opinion regarding the subject matter based on the evidence collected. This opinion is communicated through a written report.

References:

FAQs

What are the five elements of an assurance engagement?

The five elements of an assurance engagement are:

  • Three-party relationship
  • Subject matter
  • Suitable criteria
  • Sufficient and appropriate evidence
  • Conclusion/opinion

What is the purpose of an assurance engagement?

The purpose of an assurance engagement is to provide assurance to intended users about the reliability of information or the effectiveness of processes.

Who are the three parties involved in an assurance engagement?

The three parties involved in an assurance engagement are the practitioner (auditor), the responsible party (client), and the intended users (users of financial statements).

What is the subject matter of an assurance engagement?

The subject matter of an assurance engagement is the specific aspects of the system, processes, product, organization, or person that the user requires information about to build justified trust.

What are suitable criteria in an assurance engagement?

Suitable criteria are mutually understood ways of assessing the trustworthiness of the subject matter. They determine what measures or standards are appropriate for assessing the subject matter and whether commonly accepted standards can be agreed upon.

What is sufficient and appropriate evidence in an assurance engagement?

Sufficient and appropriate evidence is evidence that is both adequate in quantity and relevant to the subject matter. It is necessary to assess the subject matter against the criteria.

What is a conclusion/opinion in an assurance engagement?

A conclusion/opinion is the practitioner’s statement about the reliability of information or the effectiveness of processes. It is based on the evidence collected during the assurance engagement.

What are the benefits of an assurance engagement?

The benefits of an assurance engagement include:

  • Increased confidence in the reliability of information
  • Improved decision-making
  • Reduced risk of fraud and error
  • Enhanced reputation

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