CHAPTER 1

INTRODUCTION TO ASSURANCE ENGAGEMENTS

I. Review Questions

1. Refer to page 2, paragraph 3 of the textbook.

2. Refer to page 3, paragraph 2 of the textbook.

3. Refer to page 4, paragraph 2 of the textbook.

4. In an assurance engagement, a practitioner aims to provide a high or moderate

level of assurance that an assertion being made by one party for use by another
party can be relied upon while in a consulting engagement, the practitioner
aims to provide professional advice on how the limited resources of an
enterprise can be put into optimal use in order to attain the company’s
objectives.

5. Examples of assurance engagements on information technology are:

a) CPA Web Trust Service
b) Information System Reliability Service

Refer to page 7 of the textbook for a brief discussion of these services.

6. Refer to page 10 of the textbook.

7. Refer to pages 12 to 17 of the textbook.

8. Refer to page 18, paragraphs 1 and 2 of the textbook.

9. Refer to pages 15 to 23 of the textbook.

10. Refer to pages 20 to 22 of the textbook.

II. Multiple Choice Questions

1. c 5. d 9. d 13. d
2. a 6. c 10. c 14. c
3. d 7. d 11. d
4. d 8. d 12. c

III. Comprehensive Cases

1-2 Solutions Manual - Principles of Auditing and Other Assurance Services

Case 1. (a) The purpose of CPA reporting on internal control is to provide

assurance about whether management’s assertion about internal control is
fairly stated in all material respects, based on the control criteria being
followed. Thus, for example, an examination provides the highest degree
of assurance that information produced by the system will be reliable.

(b) When involved in performing an examination on the effectiveness of

internal control a practitioner should:
• Plan the engagement.
• Obtain an understanding of internal control.
• Evaluate the design and operating effectiveness of internal
control.
• Form an opinion about the fairness of management’s
assertion on internal control.

Case 2. (a) PSA 100, Assurance Engagements, provide guidance for an

engagement such as one on customer satisfaction. They provide
guidelines on audits and related services such as examinations and
reviews.

(b) Suitable criteria are those that are objective and permit reasonably
consistent measurements. In addition, the criteria must be sufficiently
complete such that no relevant factors are omitted that would affect a
conclusion about the subject matter. Finally, the criteria must measure
some characteristic of the subject matter that is relevant to a user’s
decision.

(c) INDEPENDENT ACCOUNTANTS’ REPORT

We have examined the accompanying Schedule of Customer Satisfaction
Measures for the three years ended December 31, 20X4. This schedule is
the responsibility of Gonzales, Inc.’s management. Our responsibility is to
express an opinion on this schedule based on our examination.

Our examination was conducted in accordance with standards on

assurance engagements adopted in the Philippines and, accordingly,
included examining, on a test basis, evidence supporting the schedule and
performing such other procedures as we considered necessary in the
circumstances. We believe that our examination provides a reasonable
basis for our opinion.

In our opinion, the Schedule of Customer Satisfaction Measures referred

to above presents fairly, in all material respects, the levels of customer
satisfaction for the three years ended December 31, 20X4, in conformity
with the measurement and disclosure criteria set forth in Note 1.
 Introduction to Assurance Engagements 1-3

Santos & Lopez, LLP

March 1, 20X5
NOTE TO INSTRUCTOR: If the CPAs believe that the criteria are not
understandable by users other than management a paragraph must be
added to the report restricting its use.