Acca aaa s21 Notes

September 2021 to June 2022 exams
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Auditing is the most regulated form of assurance you will meet in AAA. Legislation, International 
Auditing Standards and financial reporting standards all lay down rules about how auditing should be 
carried out and how financial statements should be prepared. Other forms of assurance are much less 
uniform and this can cause a problem unless the work to be performed is precisely agreed between 
auditor and client at the very start. For example, if you are asked to give assurance about a cash flow 
forecast you need to find out if it is a one, three or five year budget as the work and difficulties are 
very different in each case.
2. Elements of an assurance engagement
2.1. The elements of an assurance engagement
The following are the five elements of an assurance engagement:
(1)
A three party relationship involving a practitioner, a responsible party and intended users.
(2)
Appropriate subject matter (eg the financial statements, a budget, a take-over target).
(3)
Suitable criteria (eg financial reporting standards)
(4)
Sufficient appropriate evidence.
(5)
A written assurance report in the form appropriate to a reasonable assurance engagement or a 
limited assurance engagement.
Item 4 on the list is sufficient appropriate evidence and if assurance had to be summed up in one 
word 
‘EVIDENCE’ 
would be it. Assurance is not based on the auditor guessing or hoping that 
something is the case. All assurance is based on gathering sufficient appropriate evidence and if the 
required evidence is not available then assurance cannot be given.
It will be said again, but when it comes to the audit of financial statements evidence is required about 
two elements:
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Is the amount materially correct?
๏
Do the presentation and disclosures conform to the financial reporting standards?
There is no point in tracing research and development expenditure back to invoices supporting the 
accuracy of the amounts if you do not also give assurance that the amounts have been written off or 
capitalised in line with the IAS 38. Evidence is needed to support the treatment of the amounts.