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Summary Assurance Services

Course
- Assurance Services
- Kuijpers
- 2018 - 2019
- Erasmus Universiteit Rotterdam (Erasmus Universiteit Rotterdam, Rotterdam)
- Accountancy and Financial Management
370 Flashcards & Notes
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A snapshot of the summary - Assurance Services

  • Lecture 1

  • What are assurance services?
    Independent professional service that improves the quality of information for decision makers.
  • How is assurance services perceived?
    It is perceived as unbiased.
  • Information and estabished criteria
    To do an audit, the information must be verifiable and some standards (criteria) must be available by which the auditor can evaluate the information. Those criteria can vary depending on the information being audited - e.g. quantifiable information, or more subjective. For more subjective information, clear criteria are harder to establish. Hence, auditors and the entities being audited agree upfront ons those standards.
  • Accumulating and evaluating evidence
    To satisfy the purpose of the audit, evidence must be obtained that is of sufficient quality and quantity. The types and amounts necessary must be determined and this information must be evaluatied corresponding to the established criteria.
  • Competent, independent person
    The auditor must be qualified to understand the criteria used and must be competent (i.e. skilled) to know the types and amounts of evidence to accumulate, needed for a proper conclusion, after examining the evidence. The auditor must also have an independent mental attitude, otherwise the auditor's competence is of littel value or they are biased in their gathering of evidence.
  • Biased and motives of the provider
    If information is provided by someone wose goals are inconsistent with those of the decsiion maker, the information may be biased in favor of the providor. The reaso can be hones optimism about future events or an intentinal emphasis designed to influence users. In either case, the result is a misstatement of information.
  • Complex exchange transactions
    The increase in complexity of exchange transactions between organizations causes that it is also becoming more difficult to record properly. This has also resulted in increasingly complex accounting standards.
  • Where do you need to look at while reducing information risk?
    There must be a cost-benefit trade-off between the cost of hihger interest rates or costs to lower information risks, meanwhile reducing the interest rates.
  • What are the three main ways to reduce information risk?
    1. User verifies information
    2. User shares information risk with management
    3. Audited financial statements are provided
  • User verifies information
    The user may go to the business premise to examine records and obtain information about the reliability of statements. Normally this is impractical because of costs and economically inefficient. Hence, it happens only on rare occasions.
    E.g. tax authorizations, due dilligence process in M&A.
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