CHAPTER 22 Assurance Services

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CHAPTER 22Assurance Services

• Assurance Services
• Example Assurance Engagements

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Assurance Services Defined

• Assurance services are independent
  professional services that improve the quality of
  information, or its contexts, for
  decision-makers.

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Assurance Services Defined

• Assurance services are independent
  professional services that improve the quality of
  information, or its contexts, for
  decision-makers.
• independent
• professional services
• that improve the quality of information, or its
  contexts
• for decision-makers.

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Figure 22-1Universe of CPA Services
Consulting
Compilation
Assurance
Audit / Attestation
Technology
International
Financial Planning
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Figure 22-2Comparison of Attest, Assurance,
Consulting
Attestation Assurance Consulting
Public Company Private Company
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Important IT Trends

• It will be easier to capture, produce, retrieve,
  and analyze information
• Security technologies will continue to improve
• IT will accelerate the shift in power from those
  who prepare information to those who use
  information
• Data access may replace reporting
• IT may change the relationship among the
  assurers, preparers and users of information

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Figure 22-3Loss of Market Share
Investor / User Information
Other sources
Financial statements
1900
2000
year
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Competitors Other Consultants

• Highly capitalized
• Unconstrained by CPA Rules
• Nimble
• Subject-matter experts
• Information providers with large databases or
  installed systems
• Certified in other disciplines

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CPA Competitive Advantage

• Trusted business advisor
• Independence
• Access to clients
• Concern for the public interest
• Quality control systems in place

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Assurance Independence

• Assurance independence is the absence of
  interests that create an unacceptable risk of
  material bias with respect to the quality or
  context of information that is the subject of an
  assurance engagement.

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Figure 22-4 Alternative Standard Setting
Strategies
Value to decision- makers
Iterative Standard-Setting Process
c
Traditional Standard-Setting Process
b
a
Time
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Example Assurance Service Engagements
http//www.aicpa.org/assurance/index.htm
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• Major risks addressed in WebTrust Criteria
• Business and information privacy practices
• Discloses practices
• Executed transactions in accordance with
  practices
• Transaction integrity
• Effective controls provide reasonable assurance
  that transactions are completed and billed as
  agreed
• Information protection
• Effective controls provide reasonable assurance
  that private customer information is protected
  from uses not related to the entitys business
• Attestation engagement under SSAE Section 100

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• SysTrust Principles
• Availability The system is available for
  operation and use at times set forth in the
  service level statements or agreements.
• Security The system is protected against
  unauthorized physical and logical access.
• Integrity Systems processing is complete,
  accurate, timely and authorized.
• Maintainability The system can be updated when
  required in a manner that continues to provide
  for system availability, security, and integrity.

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• SysTrust Criteria associated with each principle
• The entity has defined and communicated
  performance objectives, policies and standards
• The entity utilized procedures, people, software,
  data, and infrastructure to achieve the
  objectives, policies and standards
• The entity monitors the system and takes action
  to achieve compliance with objectives, policies
  and standards

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• Purpose of the engagement
• Identification and assessment of primary
  potential risks faced by a business or entity
• Independent assessment of risk identified by the
  entity
• Evaluation of an entitys system for identifying
  and limiting risks

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• Useful way to categorize risks
• Strategic environment risks
• Operating environment risks
• Information risks

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Risk of Material Loss
High
Low
High
Probability Of Occurrence
Low
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• Potential Services
• Organizations with performance measurements
  systems
• Assess the reliability of information
• Assess the relevance of information
• Provide advice on how to improve the system and
  its actual results
• Organizations that do not have performance
  measurements systems
• Identify relevant performance measures
• Help design (and implement??) a performance
  measurement system
• Provide advice on how to improve the system and
  its actual results

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• See Figure 22-11
• Assurance Services
• Financial
• Nonfinancial
• Direct Services
• Financial
• Nonfinancial
• Consulting
• Financial
• Nonfinancial