Audit Firm Engagement Types: Standard Audit, Forensic audit, Review, and Other Assurance Engagements (Source: ChatGPT)
Understanding Audit Firm Engagement Types
Audit firms provide a variety of engagement types, each serving different purposes based on the level of assurance required. Here are the most common types:
1. Standard Audit (Financial Statement Audit)
A standard audit, also known as a financial statement audit, provides reasonable assurance that a company's financial statements are free from material misstatements. It follows established auditing standards, such as the International Standards on Auditing (ISA), and results in an auditor's opinion on the fairness of financial reporting.
2. Forensic Audit
A forensic audit investigates financial records for fraud, misconduct, or legal disputes. Unlike standard audits, it focuses on detecting financial irregularities, analyzing evidence, and providing expert testimony in legal proceedings. Forensic audits are often used in cases of corporate fraud, embezzlement, and litigation support.
3. Review Engagement
A review engagement provides limited assurance on financial statements. The auditor performs analytical procedures and inquiries but does not conduct extensive testing. A review is less comprehensive than a standard audit and is often used when stakeholders require some assurance but not a full audit.
4. Other Assurance Engagements (e.g., Agreed-Upon Procedures - AUP)
Other assurance engagements include services tailored to specific needs. One example is an Agreed-Upon Procedures (AUP) engagement, where auditors perform specific procedures agreed upon by the client and intended users. Unlike audits or reviews, AUP engagements do not provide an overall opinion but instead present factual findings. These engagements are commonly used for compliance audits, due diligence, and regulatory reporting.
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