- 20 Marks
AA – MarJul 2020 – L2 – Q5 – Assurance Services and Due Diligence for Hallmark Ltd
Explanation of assurance services, levels of assurance, and elements of an assurance engagement.
Question
The Directors of Hallmark Limited have decided that in order to improve its operating efficiency, there is need to increase the working capital of the company. The last audited financial statements of the company were up to September 30, 2018. A prospective investor has decided to perform due diligence on the company before investing a certain amount of money in the business. The Financial Controller of Hallmark Limited has advised the directors that prior to the due diligence exercise, there might be need to perform assurance services on the company’s financial result as the investor may not be willing to accept the last audited financial statements for the due diligence. Your father, who is a director of the company, has approached you as an accountancy student to give more explanations to him on the foregoing.
You are required to explain:
a. Assurance services (5 Marks)
b. The various levels of assurance services (7 Marks)
c. The components/elements of an assurance engagement (8 Marks)
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