ASSURANCE CERTIFICATE LEVEL

A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

CHAPTER-1: CONCEPT AND NEED FOR ASSURANCE

Q-1: What is assurance engagement? (Page-3)
Ans: An assurance engagement is one in which a practitioner expresses a conclusion, designed to enhance the
degree of confidence of the intended users, other than the responsible party, about the outcome of the
evaluation or measurement of a subject matter against criteria.
Q-2: What are the key elements of an assurance engagement? (Page-3)
Ans: The keys elements of an assurance engagement are as follows:
(i) Three people or groups of people involved:
(a) The practitioner (For example, the audit firm)
(b) The intended users (For example, the shareholders)
(c) The responsible party (For example, the board of directors)

(ii) A subject matter:

(a) Data (For example, financial statements or business projections)
(b) Systems or processes (For example, internal control system or computer systems)
(c) Behavior (For example, corporate governance)

(iii) Suitable criteria:

(a) Law and Accounting standards
(b) Code of practice, Code on Corporate governance
(c) ISAs, IFRSs

(iv) Sufficient appropriate evidence to support the assurance opinion: The practitioner must obtain
evidence so that the criteria have been met.

(v) A written report in appropriate form: Lastly, it is required that assurance reports are provided to the
intended users in a written form and contain certain specified information.
Q-3: You are an accountant who has been approached by Jamal, who wants to invest in Company X. he
has asked you for assurance whether the most recent financial statements of Company X are a reliable
basis for him to make his investment decision. (Page-4)
Identify the key elements of an assurance engagement in this scenario, if you accepted the
engagement.
Ans: The keys elements of an assurance engagement are as follows:
(i) Three people or groups of people involved
(a) The practitioner (You)
(b) The intended users (Jamal)
(c) The responsible party (The directors of company X)
(ii) A subject matter
(a) Data (For example, most recent financial statements of company X)

(iii) Suitable criteria

(a) Law and Accounting standards
(b) Code of practice, Code on Corporate governance
(c) ISAs, IFRSs
(iv) Sufficient appropriate evidence to support the assurance opinion: Inspect the books and
documents of company X.

(v) A written report in appropriate form: Opinion on the financial statements of company X.

Chapter – 1(Concept of and need for assurance) Page 1

 ASSURANCE CERTIFICATE LEVEL
A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

Q-4: What types of assurance engagement as per framework? (Page-4)

Ans: The framework identifies two types of assurance engagement:
(a) Reasonable assurance engagement.
(b) Limited assurance engagement.

Q-5: What do you mean by reasonable assurance & limited assurance? (Page-5)

Reasonable assurance: A high level of assurance but not absolute level of assurance.
Limited assurance: In a limited assurance engagement, the practitioner gathers sufficient appropriate
evidence but the quality of evidence gathered would be lower as compared to reasonable assurance and
gives a report in the form of a negative assurance.

Q-6: How the level of assurance varies? (Page-5)

Type of agreement Evidence Required Opinion/Conclusion Given

• Reasonable assurance Sufficient and appropriate Positive
• Limited assurance Sufficient and appropriate (lower level) Negative

Q-7: What are key differences between two types of assurance engagement? (Page-5)

Ans: The key differences between two types of assurance engagement are:
The level of evidence obtained
The type of opinion given

Q-8: Give few examples of assurance engagements. (Page-6)

Ans: The key example of an assurance engagement in Bangladesh is a statutory audit (External audit). Other
examples of assurance engagements include other audit. For example:
(1) Insurance company audits (2) Bank audits (3) Branch audit (4) Charity audits (5) Environmental
audits (6) Local authority audits (7) Pension scheme audits (8) Solicitor’s audits

There are also many issues users want assurance on:

(1) Internal audit (2) Internal control reports. (3) Circulation reports (4) Cost/benefit reports (5)
Inventories and receivable reports (6) Reports on business plans or projections (7) Reports on website
security, such as Web Trust (8) Review of specialist business activities. (9) Value for money studies (10)
Due diligence (11) Fraud Investigations.

Q-9: Why is assurance important? (Page-6)

Ans: The key benefit of assurance is the independent, professional verification being given to the users on the
subject matter. In addition, assurance may have subsidiary benefits such as
(1) Users may also benefit from additional confidence in the subject matter given to others.
(2) The existence of an assurance service may prevent errors or frauds occurring in the first
(3) It helps to ensure that high quality, reliable information exists, leading to effective markets that
investors have faith in and trust
(4) It enhances the credibility of information.

Q-10: Why can assurance never be absolute? (Page-7)

Ans: Assurance can never be absolute. Assurance providers will never give a certification of absolute
correctness due to the limitations.

Chapter – 1(Concept of and need for assurance) Page 2

 ASSURANCE CERTIFICATE LEVEL
A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

Q-11: What are the limitations of an assurance services? (Page-7)

Ans: The limitations of assurance service include:

(1) The fact that testing is used – the auditors do not oversee the process of building the financial
statements from start to finish.
(2) The fact that the accounting systems have inherent limitations.
(3) The fact that most audit evidence is persuasive rather than conclusive.
(4) The fact that assurance providers would not test every item in the subject matter.
(5) The client’s staff members may collude in fraud that can be deliberately hidden from the auditor.
(6) The fact that Professional judgments have to be made.
(7) The fact that assurance providers rely on the responsible party and its staff to provide correct
information.
(8) The fact that some items in the subject matter may be estimates.
(9) The fact that a sampling approach is used

Q-12: What do you mean about expectations gap? (Page-8)

Expectation gap: Expectations gap meaning that there is a gap between what the assurance providers
understands he is doing and what the user of the information believes he (assurance provider) is doing.

Q-13: How can the assurance provider close expectations gap? (Page-8)
Ans: The assurance provider can close expectations gap by issuing an engagement letter spelling out the work
and by regularly reviewing the format and content of reports issued as a result of assurance of assurance work.

Q-14: Definition: Audit (Page-8), true and fair (Page-9)

(1) Audit: An examination and verification of a company's financial & accounting records and supporting
documents by a professional, such as Chartered Accountant, Certified Public Accountant. Some
examples of auditing service are: Insurance company audits, Bank audits, Branch audit, Charity audits,
Environmental audits, Local authority audits, Local authority audits, Pension scheme audits, Solicitor’s
audits etc.
True: Information is factual and conforms to reality, not false.
Fair: Information is free from discrimination and free from bias in compliance with expected standards
and rules.

Q-15: What are the objectives of an audit? (Page-9)

Ans: The objective of an audit of financial statements is to enable the auditor to express an opinion whether the
financial statements are prepared, in all material respects, in accordance with an applicable financial recording
framework.

Q-16: Which person cannot be eligible for appointment as an auditor as per Companies Act, 1994?
(Page-10)

Ans: Companies act 1994 sets out factors which make a person ineligible for being a company auditor, for
example, if he or she is:
(a) An officer or employee of the company.
(b) A partner or employee of such a person.
(c) Any partner in a partnership in which such a person is a partner.
(d) Ineligible by the above for appointment as auditor of any directly connected companies.

Q-17: What standards and guidance are issued by ICAB for auditing? (Page-10)

Ans The followings standards and guidance are issued by ICAB for auditing:
a) Auditing standards
b) Ethical standards for auditors

Chapter – 1(Concept of and need for assurance) Page 3

 ASSURANCE CERTIFICATE LEVEL
A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

c) Practice notes
d) Bulletins
e) Standards for reviews of interim financial statements performed by the auditor of the entity.

Q-18: International Standards on Auditing (ISAs) made up by what content? (Page-10)

Ans: International Standards on Auditing (ISAs) made up of:

a) Introductory material and definition
b) Objectives
c) Requirements
d) Application and explanatory material (including appendices)
e) Example of what the auditor must think about (and do) in practice.

Q-19: An audit will comprise several stages along the way to its eventual completion and the issuance of
the auditor’s opinion. What are these stages are? (Page-11)

Ans: An audit will comprise following several stages are mentioned below:

Obtaining the engagement

▼
Planning
▼
Performance procedures
▼
Review and completion
▼
Reporting

Q-20: What are the Overall Objectives of the auditor as per ISA 200? (Page-11)

Ans: ISA 200 states that the overall objectives of the auditor are:
a) To obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud of error, thereby enabling the auditor to express an opinion
on whether the financial statements are prepared, in all material respects, in accordance with an
applicable financial reporting framework; and

b) To report on the financial statements, and communicate as require by the ISAs, in accordance with the
auditor’s findings.

Q-21: What procedures to be comply by auditor to obtain Overall Objectives as per ISA 200? (Page-12)

Ans: The following procedures to be comply by auditor to obtain Overall Objectives as per ISA 200:
a) Comply the relevant ethical requirements
b) Plan and perform the audit with professional scepticism
c) Exercise professional judgement
d) Obtain audit evidence that is both sufficient and appropriate, from which reasonable conclusions may
be drawn, on which the auditor’s opinion is then based.

Q-22: Define Professional scepticism & Professional judgement? (Page-11)

Professional scepticism: Professional scepticism is an attitude that includes a questioning mind, being alert to
conditions which may indicate possible misstatement due to error or fraud, and a critical assessment of audit
evidence.

Professional judgement: Professional judgement is the application of relevant training, knowledge and
experience in making informed decisions about the courses of action that are appropriate in the circumstances
of the audit engagement.

Chapter – 1(Concept of and need for assurance) Page 4

 ASSURANCE CERTIFICATE LEVEL
A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

Q-23: To plan and perform an audit with an attitude of professional scepticism, auditor requires to be
alert about some facts. What are these? (Page-12)

Ans: To plan and perform an audit with an attitude of professional scepticism, auditor requires being alert
about following facts:
a) Audit evidence that contradict other audit evidence obtained
b) Information that brings into question the reliability of documents and responses to requires to be used
as audit evidence
c) Conditions that may indicate possible fraud
d) Circumstances that suggest the need for audit procedures in addition to those required by IASs.

Q-24: Why Professional scepticism needs to be maintain throughout the audit period? (Page-12)

Ans: Professional scepticism needs to be maintaining throughout the audit period to reduce the risks of
overlooking unusual transactions, over-generalising when drawing conclusions and using inappropriate
assumptions in determining the nature, timing and extent of audit procedures and evaluating the result of them.
It is also necessary to the critical assessment of audit evidence.

Q-25: In which areas professional judgement exercise by auditor when planning and performing an
audit of financial statements? (Page-12)

Ans: In following areas professional judgement requires by auditor when planning and performing an audit of
financial statements:
a) Materiality and audit risk.
b) Nature, timing and extent of audit procedures.
c) Evaluating of whether sufficient appropriate audit evidence has been obtained.
d) Evaluating management’s judgements in applying the applicable financial reporting framework.
e) Drawing conclusions based on the audit evidence obtained.

All Self-test, Interactive Question & Worked Example should be done from the manual.

Previous year’s question:

May-June’ 2010
2. In Bangladesh, the auditor will normally express his audit opinion by reference to the “true and fair view”,
which is an expression of reasonable assurance. Briefly define the terms “true and fair view”. (Q-14)
3. You are an accountant who has been approached by X, who wants to invest in Company ABC. He has asked
you for assurance whether the most recent financial statements of Company ABC are a reliable basis for him to
make his investment decision.
Identify the key elements of an assurance engagement in this scenario, if you accepted the
engagement.(Q-3)
Nov-Dece’ 2010
1. ‘Assurance can never be absolute’ (Q-10). Discuss the limitation of assurance (Q-11). Which three of the
following are benefits of assurance work? (Page-16)
• An independent professional opinion
• Additional confidence given to other related parties
• Testing as a result of sampling is cheaper for the responsible party
• Judgments on estimates can be conclusive
• Assurance may act as a deterrent to error or fraud

May-June’ 2011
1. What is assurance engagement (Q-1)? What are the key elements of an assurance engagement (Q-2)?

Chapter – 1(Concept of and need for assurance) Page 5

 ASSURANCE CERTIFICATE LEVEL
A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

Nov-Dece’ 2011
9. Assurance service is an independent professional service, typically provided by Chartered Accountants, with
the goal of improving the information or the context of the information so that decision makers can make more
informed, and presumably better decisions. Assurance services provide independent and professional opinions
that reduce the information risk (risk that comes from incorrect information)
a. Audit and Assurance are always used together. What is the exact difference between these? (Below)

Ans: An audit engagement is an assurance engagement, but not all assurance engagements are audits.
Audit is the general evaluation of an organization, system, process, project or product, and can be performed by
both internal and external auditors. Assurance usually refers to the "external" or attestation function. This is
usually provided by accounting or auditing firms. Assurance provides an independent opinion.
b. Under the “International Framework for Assurance Engagements,” how many types of assurance
engagement a practitioner is permitted to perform? Define all. (Q-4, 5 &6)

May-June’ 2012
1. Briefly explain the key elements of an assurance engagement (Q-2) and what are the types of assurance
engagement as per the International Framework for Assurance engagements? (Q-4, 5 & 6)
5. A key issue for accountants is that there are limitations to assurance services, and therefore there is always a
risk involved that the wrong conclusion will be drawn. What are the limitations of assurance services? (Q-11)
8. b. What is the `expectation gap’ in assurance engagement? (Q-12)

May-June’ 2013
1. (a) List the key elements of an assurance engagement. (Q-2)
(b) In addition to audit, users want some other assurance services. Give few examples. (Q-8)

Nov-Dece’ 2013
2. a. Define assurance engagement? (Q-1)
b. What are the types of engagement as per definition given by IFAC? (Q-4 &5)
What conclusions are given against those engagements? (Q-6)
c. The auditor normally expresses his audit opinion by reference to the “true and fair view”, which is an
expression of reasonable assurance. Define the term “true and fair”. (Q-14)
d. The key benefit of assurance is the independent and professional examination carried out by the auditor
during the course of audit. In addition, assurance gives some subsidiary benefits. List subsidiary benefits
those are provided by the assurance providers. (Q-9)
e. What are the limitations of assurance services for which the auditor cannot give a certificate of absolute
assurance or correctness? (Q-10 & 11)

May-June’ 2015
1. An auditor requires relevant and reliable information from the management in order to satisfy himself that he
has obtained sufficient and appropriate audit evidence on the basis of which he can form his audit/assurance
opinion. a. Define assurance services (Q-1 & 8), attestation services (Below) and auditing services (Q-10) with
examples.
In an attestation engagement, a professional accountant expresses an opinion on the reasonableness of a
particular assertion or set of assertions. Examples of assertions covered by attestation engagements include
financial forecasts and compliance with laws or procedure.
b. What are the factors, which make a person ineligible for being a company auditor as per the companies Act,
1994? (Q-16) What non-audit services are prohibited to be carried out by auditors? (Below)
Ans: As per Bangladesh Security Exchanges and Commission (BSEC) corporate governance guidelines dated
07 August 2012, following non-audit services are prohibited for auditors:
(a) Appraisal or valuation services or fairness opinions, (b) Actuarial services,

Chapter – 1(Concept of and need for assurance) Page 6

 ASSURANCE CERTIFICATE LEVEL
A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

(c) Book-keeping or other services related to the accounting records or financial statements,
(d) Broker-dealer services, (e) Internal audit service; and
(f) Financial information systems design and implementation
c. ABC Co. is a private limited company. The company is planning to go for IPO in September 2015. The
Managing Director of the company asked you, as auditor for last 3 years, to give an absolute assurance report
for last 5 years that his company is showing increasing trend in sales and profits. Can you as a practitioner give
absolute assurance? (Q-10) Give reasons for your answer (Q-11)
1. d. (i) For the purpose of giving opinion you have to follow Bangladesh Standards on Auditing
(BSA).Discuss the terms `Reasonable assurance engagement’ and `Limited assurance engagement’ as
mentioned in the BSA. (Q-4, 5, 6 & 8)
Nov-Dece’ 2015
1. a. Define assurance engagement in any audit function? (Q-1)
b. What are the types of engagement as per definition given by IFAC? Explain (Q-4 & 5)
c. What is the meaning of Auditors’ normal expression of “true and fair view” in any audit report? (Q-9)
Which denotes a reasonable assurance? (Q-5, Partly)
d. What are the key benefits of assurance in any audit done by the Auditors? List down the subsidiary benefits
those are provided by the assurance providers. (Q-9)
e. “Certificate of absolute assurance or correctness” cannot be provided due to some limitations. What are
those? (Q-10 & 11)
Nov-Dece’ 2016
1. a. Define ‘expectations gap’ and give three examples of misunderstandings which contribute to the
expectations gap. (Q-12)
b. The key benefit of assurance is the independent professional verification being given to the users. In
addition, assurance gives some subsidiary benefits. What are those subsidiary benefits? (Q-9)

May-June’ 2017
1. a. How many types of assurance engagement are identified in the International Framework for Assurance
Engagement? (Q-4)
b. You being a professional accountant in practice have been approached by Mr. Rahim who want to invest in
Atia Foods Ltd. He asked you for assurance whether the recent financial statement of the company are reliable
basis for him to make his investment decision. As you have accepted the engagement, identify the key elements
of an assurance engagement in this scenario. (Q-3)
c. In an assurance engagement there are several subsidiary benefits available to other parties, although the
assurance report is not addressed to such parties. Briefly describe these subsidiary benefits. (Q- 9)

Nov-Dece’ 2017
1. a. What is the meaning of auditor's normal expression of “true and fair view” in any audit report, which
denotes a reasonable assurance? (Q-14)
b. ‘Certificate of absolute assurance or correctness’ cannot be provided due to some limitations. What are
those limitations? (Q-11)
c. Define assurance engagement in an audit function. (Q-1)

May-June’ 2018
1.(a) The opinion given in an assurance engagement depends on what type of engagement it is. (Q-4 & 5) Give
appropriate examples of opinion given in different types of assurance engagement. (Below)
Ans:
The types of opinion given in each engagement are stated below:
• Positive opinion: A practitioner is seeking evidence to conclude whether the report issued by the
Chairman of a company in the financial statements is reasonable or not, he could seek evidence
conclude that the statement is reasonable and state in a report something like this:

Chapter – 1(Concept of and need for assurance) Page 7

 ASSURANCE CERTIFICATE LEVEL
A combination of Manual & Suggested Answers up to May-June 2019 With (ISA)s Reference

“In my opinion, the statement by the chairman regarding X is responsible”. This is a positive statement
of his conclusion that the statement is reasonable..

• Negative opinion: In the same scenario, the practitioner could alternatively state in a report something
like this:

“In the course of my seeking evidence about the statement by the chairman, nothing has come to my
attention indicating that the statement is not reasonable”.

Nov-Dece’ 2018
1. Professional accountants in public practice are entrusted to issue various types of reports and certificates
under different types of engagements. Each one of the engagements has some very specific feature and thus
results in different forms of reports, though users commonly treat them as audit. Here the respective
accountants should take the advantage to educate the users with reference to nature, outcome and use of the
results of an engagement.
(a) How would you define auditing service and assurance service? Give two examples from each of these
services. (Q-1, 8 & 14)
(b) In an audit engagement, what are overall objectives of an auditor as per ISA 200? (Q-20)

2. Write short notes on the following: (Q-22)

(i) Professional scepticism .
(ii) Professional judgement .

May-June’ 2019
1. a) Write short notes on the types of assurance engagements that are covered in the International
Framework for Assurance. (Q-4, 5 & 6)

2. Audit and assurance, like many other services, encounter certain limitations due to perception gaps
in the minds of the seekers of all these services.
a) ‘Auditors cannot issue absolute assurance certificate.’ Describe this statement indicating the
limitations as mentioned above. (Q-11)

To collect update soft copy – email: mnkhan22501@gmail.com

Professional Education Clinic Care.
(For CA Certificate & Professional Level Students)

Chapter – 1(Concept of and need for assurance) Page 8