Assurance Engagement Risk
fundamental principles of assurance services
Definition
Assurance engagement risk
●the risk that the practitioner expresses an ' inappropriate conclusion when the subject
matter information is materially misstated.
Managing assurance engagement risk
The practitioner may reduce assurance engagement risk to a lower level by increasing the
assurance level provided by the procedures performed.
●To be meaningful, the level of assurance obtained by the practitioner is likely to
enhance the intended users’ confidence about the subject matter information to a
degree that is more than inconsequential.
Cost-benefit Consideration
●In performing evidence-gathering procedures, the practitioner is expected to observe
cost-benefit consideration.
●This means that “the benefits that will be derived from obtaining the evidence should
exceed the cost of obtaining it’.
●The practitioner considers the relationship between the cost of obtaining evidence
and the usefulness of the information obtained.
●However, the matter of difficulty or expense involved is not a valid basis for omitting
evidence-gathering procedures for which there is no alternative.
●To simplify, in case there is a significant evidence-gathering procedure that is required
but involves high cost or high level of difficulty, the practitioner may:
1. Identify and perform alternative procedures that can minimize the associated
cost or level of difficulty.
2. In the absence of alternative procedures, the practitioner is still required to
perform the procedures as long as he/she believes that performance of it is
necessary and beneficial to the entire engagement.
Professional Skepticism
●The practitioner plans and performs an assurance engagement with an attitude of
professional skepticism recognizing that circumstances may exist that cause the
subject matter information to be materially misstated.
