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.
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.