Page 178 - CA Final Audit Titanium Full Book. (With Cover Pages)

CA Ravi Taori

09 AUDIT-RELATED SERVICES

Case Study-- Trends Multi Products Limited

Business Operations: Trends Multi Products Limited sells ethnic items, procuring a variety of stocks from
brassware to handloom home furnishings and exotic handicrafts through a chain of dealers. The procurement is
done at multiple locations across the country, necessitating an extensive inventory control system.
Inventory Verification Request: Due to the large inventories and associated risks, the company requests CA.
Shaan to undertake a physical verification of inventories and reconcile them with inventory records. The
company offers staff resources support and expects the exercise to be performed in accordance with professional
standards.
Professional Dilemma: CA. Shaan is unsure whether to accept the engagement and, if accepted, the form and
content of the report. He considers SA 501, which applies to audit of financial statements for obtaining audit
evidence pertaining to existence and condition of inventories. However, he is not conducting an audit of
financial statements, leading him to question the applicability of SA 501.
Search for Standards: Shaan considers whether there is a standard for engagements involving agreed-upon
procedures where factual findings are reported. He questions whether such an engagement would be an
assurance engagement and why the company needs such a report. He discovers Standard on Related Services
4400.
Compilation Report Request: In a separate instance, a client approaches Shaan to help prepare its financial
statements and provide a compilation report. Shaan wonders whether such a report would be an assurance report
and the responsibilities of a professional accountant in such an engagement.

Introduction
No expression of Opinion: Chartered Accountants in practice are often asked to provide services to clients
which do not involve the expression of an opinion on the truth and fairness of the financial statements.
SRS: For the purpose of standardising the procedures to perform such kind of non-assurance services, the AASB
of ICAI issued two Standards on two different services i.e. Standards on Related Services. The following standards
have been issued under Standards on Related Services:
SRS 4400 Engagements to Perform Agreed-upon Procedures Regarding Financial Information and
SRS 4410 Compilation Engagements.
What are Related Services?
Assurance Engagement Definition: “Assurance engagement” means an engagement 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.
Practitioner's Opinion: It means that the practitioner gives an opinion about specific information due to which
users of information are able to make confident decisions. Knowing well that the chance of information being
incorrect is diminished, users are able to make confident decisions.
Related Services: Not all engagements performed by practitioners are assurance engagements. Other frequently
performed engagements that do not meet the definition of assurance engagements include:
• Tax Return Preparation: The preparation of tax returns where no conclusion conveying assurance is
expressed.
• Consulting Engagements: Consulting (or advisory) engagements such as management and tax consulting.
What are Agreed-upon Procedures?

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