4 3 Reporting on Attestation Engagements Explained
Key Concepts
- Attestation Engagements
- Types of Attestation Engagements
- Attestation Standards
- Attestation Report
- Opinion Types
- Going Concern Considerations
Attestation Engagements
Attestation engagements are independent engagements in which a practitioner is engaged to express a conclusion about the reliability of a written assertion that is the responsibility of another party. These engagements are governed by specific attestation standards and require the practitioner to issue a formal attestation report.
Types of Attestation Engagements
There are three primary types of attestation engagements:
- Examination: The highest level of assurance, where the practitioner performs procedures to obtain sufficient appropriate evidence to express a conclusion about the assertion.
- Review: A moderate level of assurance, where the practitioner performs inquiry and analytical procedures to express a conclusion that is limited to whether the assertion is free of material misstatement.
- Agreement: A low level of assurance, where the practitioner agrees to perform specific procedures and report on the results.
Attestation Standards
Attestation standards are guidelines established by professional bodies such as the American Institute of Certified Public Accountants (AICPA) to ensure the quality and consistency of attestation engagements. These standards provide the framework for the practitioner's procedures, evidence gathering, and reporting.
Attestation Report
The attestation report is a formal document issued by the practitioner at the completion of an attestation engagement. It includes the practitioner's conclusion about the reliability of the assertion. The report format varies depending on the type of engagement and the level of assurance provided.
Opinion Types
The opinion types in attestation engagements are similar to those in audit engagements:
- Unmodified Opinion: Indicates that the assertion is fairly stated, in all material respects, based on the applicable criteria.
- Modified Opinion: Indicates a material weakness or limitation in the assertion but does not affect the overall conclusion.
- Adverse Opinion: Indicates that the assertion is not fairly stated in accordance with the applicable criteria.
- Disclaimer of Opinion: Indicates that the practitioner is unable to express a conclusion due to a lack of sufficient appropriate evidence.
Going Concern Considerations
Going concern considerations refer to the practitioner's assessment of whether the entity is likely to continue as a going concern. If the practitioner identifies conditions or events that cast significant doubt on the entity's ability to continue as a going concern, they may include a paragraph in the attestation report to highlight the concern.
Examples and Analogies
Consider an attestation engagement as a "verification service" for a company's financial or non-financial assertions. Just as a notary public verifies the authenticity of a document, a practitioner verifies the reliability of an assertion.
Types of attestation engagements are like "levels of inspection" in a quality control process. An examination is a thorough inspection, a review is a moderate inspection, and an agreement is a basic inspection.
Attestation standards are akin to "quality control manuals" that ensure consistent and reliable verification services. The attestation report is like a "verification certificate" that communicates the practitioner's conclusion.
Opinion types are similar to "grades" in a verification process. An unmodified opinion is a passing grade, a modified opinion is a conditional pass, an adverse opinion is a failing grade, and a disclaimer of opinion is an incomplete grade due to insufficient information.
Going concern considerations are like "viability assessments" in a business plan. Just as a business plan assesses the long-term viability of a business, a practitioner assesses the long-term viability of an entity's assertions.