Q1. All audits provide some level of assurance. But different audit engagement provides different level of assurance.
Financial statement audits provide a high level of assurance. It is a detailed testing of an
organisation’s financial statements. The goal is to verify an organisation’s position is being
accurately reported in all material aspects. As a result of this engagement, auditor will express an opinion on the fairness and accuracy of client’s financial reports. However, the financial statements to be audited are responsibility of the management of the firm being audited. (Stent, Hawkes, Othman, & Arcus, 2012) Financial statement audits provide a number of benefits. Firstly, in performing financial statement audits, the auditor must be independent, which increases financial statement credibility and reliability. Secondly, when issuing an opinion, the auditor is also required to provide an Audit Finding or Management Letter. This letter will advise on various internal operations. Last but not least, auditor will use professional knowledge to compare client’s operation against others in the same industry and suggest improvements for efficiency and savings. (Week1, Massey University, 2013)
Review engagement provides only a moderate level of assurance compare to financial statement audits. A review is an engagement that auditor is only required to provide a negative assurance report. In the report, auditor states whether anything has come to attention that causes auditor to believe that the financial statements are or are not, in material aspect, in accordance with accepted accounting standards. Therefore the scope of review is narrower than that used for a financial statement audits. (Stent, Hawkes, Othman, & Arcus, 2012) Review engagement provides different benefits. Firstly, review engagement does not require supporting evidence or evaluating internal control, therefore, it provides immediate assurance. Secondly, review engagement requires less...