24 What is Audit? Detailed Explanation.

What is an assurance engagement?

Assurance engagement is a kind of service engagement (arrangement) in which a person gives his opinion on specific information.

The person giving an opinion is called a practitioner.

The practitioner is usually appointed by the intended user, who is the person who will be using the information.

The “Specific Information” is prepared by another party known as the responsible party.

For expressing an opinion on “specific information” the practitioner will examine and will obtain sufficient and appropriate evidence

The practitioner evaluates the specific information against a standard benchmark or suitable criteria and will obtain sufficient and appropriate evidence and then give his opinion on whether the specific information is as per the suitable criteria or not.

What is Auditing?

Auditing is an assurance service, in which auditor (The person who conducts audit) gives an opinion on financial information.

In auditing

Auditor is the practitioner

Financial information is the “Specific information” or the “Subject Matter” on which auditor gives his opinion.

The Persons running the entity whose audit is being conducted are responsible for preparing financial information are known as responsible party.

The users of the financial statements, for example in case of a company the shareholders of the company, are the intended users.

The auditor will examine the financial information against the financial reporting framework and will obtain sufficient and appropriate audit evidence and will express his opinion on the basis of sufficient and appropriate audit evidence that whether the financial information is prepared as per the financial reporting framework.