Page 228 - CA Final PARAM Digital Book.

Part 1 – SA 4400

QNO AUP Assignment New Course – (M23R)
4400.100 TITANIUM CNO-- SRS4400.020
CA P is the auditor of Master Data Ltd. for the year 2021-22. The company requests the auditor to
undertake an exercise involving only verification of trade receivables for half year ending 30th September
2021. The company wants to be satisfied that trade receivables are properly confirmed and reconciled.
In this regard, CA P has to verify the arithmetical accuracy of trade receivables, obtain confirmation of
trade receivables and ensure verification of proper reconciliations with confirmations.

He is in a dilemma as to whether he can give a report providing assurance to the company in this respect.
Guide CA P with reasoning. Assume that above exercise can be undertaken and there is no legal bar.
th
Answer In the given case situation, auditor has to verify trade receivables for half year ending 30 September,2021.
Such a process/exercise is only a fact finding and reporting exercise. The auditor has to report the facts as
these are. Like, he would have to state whether confirmation from a particular debtor has been received or
not.

The auditor can issue an assurance report in case of audit and review engagements. By providing assurance,
the auditor provides comfort to users of financial statements. Assurance in the above context refers to the
auditor's satisfaction as to the reliability of an assertion made by one party for use by another. To provide
such assurance, the auditor assesses the evidence collected as a result of procedures conducted and
expresses a conclusion. The degree of satisfaction achieved and, therefore, the level of assurance which may
be provided is determined by the procedures performed and their results.
However, the types of services described in the given situation falls in the related services domain. These
are, in the nature, of agreed-upon procedures to be carried out by the auditor. The auditor cannot issue an
assurance report while providing such kind of services. He can only issue a report stating facts as they are
without providing any sort of assurance. He can report only facts.

Therefore, the auditor cannot give a report providing assurance for such type of services. He can only issue
a factual report.

QNO Assurance V/s Related services New Course – (SM23)
4400.200 TITANIUM CNO-- SRS 4400.020
How do “related services” differ from assurance engagements?

Answer Audit Vs. Agreed-upon Procedures
Assurance: A key difference between an audit and agreed-upon procedures relates to assurance. An audit
expresses an opinion and provides assurance to users. However, in an agreed-procedures engagement, only
a report of the factual findings of agreed-upon procedures is provided. No assurance is given to users in an
agreed upon procedures engagement. Instead, users draw their own conclusions based on factual findings
stated in the report.
Example: For example, an engagement to evaluate the validity of accounts payable may involve comparing
names of major suppliers and amounts outstanding to the trial balance, obtaining supplier statements or
confirmations, and comparing these to the amounts in the trial balance. Further, actual findings like variation
in balances reflected in trial balance and statements or confirmations are given. The actual findings are
reported as such without providing an assurance.

www.auditguru.in PARAM 9.1 | P a g e