Types of Assurance Engagement

Assurance engagements are professional services that enhance the credibility of information by providing an independent evaluation or examination of a subject matter against established criteria. There are several types of assurance engagements, each tailored to specific purposes and levels of assurance required.

Reasonable Assurance Engagement

In a reasonable assurance engagement, the assurance practitioner aims to reduce the assurance engagement risk to an acceptably low level. This is achieved through a comprehensive examination of the subject matter, including the evaluation of internal controls, testing of transactions and balances, and analytical procedures. The practitioner’s objective is to obtain sufficient appropriate evidence to express a positive form of conclusion on whether the subject matter is presented fairly, in all material respects, in accordance with the applicable criteria.

Limited Assurance Engagement

In a limited assurance engagement, the assurance practitioner collects less evidence compared to a reasonable assurance engagement. This is because the level of assurance sought is lower, and the procedures performed are tailored accordingly. The practitioner focuses on inquiries, analytical procedures, and limited testing to obtain a reasonable basis for expressing a negative form of conclusion. The practitioner states that nothing came to their attention to indicate that the subject matter is materially misstated.

Other Types of Assurance Engagements

In addition to reasonable and limited assurance engagements, there are various other types of assurance engagements that cater to specific needs and requirements. These may include:

• Assurance on non-financial informationThis type of engagement provides assurance on information that is not presented in the financial statements, such as sustainability reports, environmental performance, and social responsibility disclosures.
• Half-year reviews of financial statementsThese engagements provide a limited level of assurance on the interim financial statements of a company, typically conducted by the company’s auditor.
• Assurance over specific criteria or complianceThese engagements focus on evaluating whether a subject matter meets specific criteria or complies with regulations or standards.

Conclusion

The type of assurance engagement chosen depends on the specific purpose, level of assurance required, and nature of the subject matter. Reasonable assurance engagements provide a higher level of assurance than limited assurance engagements, but they also require more extensive procedures and time. Limited assurance engagements are less comprehensive but can still provide valuable insights and comfort to users of the information. Other types of assurance engagements address specific needs and requirements, enhancing the credibility and reliability of information in various contexts.

References

• Assurance vs Audit: What is the Difference?
• Limited assurance vs reasonable assurance | Assurance process | ICAEW
• Levels of assurance explained

FAQs

What is the difference between reasonable assurance and limited assurance engagements?

Reasonable assurance engagements provide a higher level of assurance than limited assurance engagements. In a reasonable assurance engagement, the practitioner aims to reduce the assurance engagement risk to an acceptably low level and expresses a positive form of conclusion. In a limited assurance engagement, the practitioner collects less evidence and provides a negative form of conclusion, stating that nothing came to their attention to indicate material misstatement.

What are some examples of other types of assurance engagements?

Other types of assurance engagements include assurance on non-financial information, half-year reviews of financial statements, and assurance over specific criteria or compliance.

When is a reasonable assurance engagement appropriate?

A reasonable assurance engagement is appropriate when a high level of assurance is required, such as for an audit of financial statements.

When is a limited assurance engagement appropriate?

A limited assurance engagement is appropriate when a lower level of assurance is acceptable, such as for a review of interim financial statements or a sustainability report.

What are the benefits of obtaining assurance on non-financial information?

Assurance on non-financial information enhances the credibility and reliability of information such as sustainability reports, environmental performance disclosures, and social responsibility disclosures.

What is the purpose of a half-year review of financial statements?

A half-year review provides a limited level of assurance on the interim financial statements of a company, typically conducted by the company’s auditor.

What is the focus of an assurance engagement over specific criteria or compliance?

An assurance engagement over specific criteria or compliance evaluates whether a subject matter meets specific criteria or complies with regulations or standards.

How do I choose the right type of assurance engagement?

The choice of assurance engagement depends on the specific purpose, level of assurance required, and nature of the subject matter. It is advisable to consult with an assurance practitioner to determine the most appropriate type of engagement.