Assurance Engagements – NBC Institute

AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

Question

Piton Drilling and Engineering Services Limited was established in 2001 by Andrew and Cole. The company provides consultancy, engineering, and training services in borehole drilling, power generation, and environmental engineering services under drilling, training, and laboratories divisions. The largest division is drilling, contributing more than 60% of income, while training and laboratory services contribute over 30%.

Piton Drilling & Engineering Services Limited saw an opportunity to combine business operations with Valemu Limited, a small engineering company with three members. Valemu Limited has a strong presence in the riverine areas and commenced operations about two years ago.

The issue of the business combination was brought to the attention of Peter, the Engagement Partner for the audit of Piton Drilling and Engineering Services Limited. He suggested that Andrew and Cole should perform due diligence on the operations of Valemu Limited, regardless of the fact that they are in similar business operations. He explained that this exercise would reduce the risk of failure of the merged entity, as both quantitative and qualitative information would be available about the operations of the entity before deciding on signing the agreement.

The due diligence should cover financial viability and long-term sustainability of the merged entity. Peter made reference to a situation where a large department store was forced to wind down its operations after a business combination when it was discovered that the merged entity was highly indebted to the bank, and most of its assets had been pledged as collateral for loans.

Some staff of your firm have already been assigned to the audit engagement. You informed them that the audit would be delayed because a due diligence exercise is being carried out on the operations of the entity Piton Drilling and Engineering Services Limited intends to merge with. One of the inquisitive staff, who is tired of staying in the office, came up to you with a question: why couldn’t the audit and the due diligence review serve the same purpose?

Required:

(a) Differentiate between due diligence report and external audit report. (3 Marks)

(b) Discuss the items you feel should be investigated or reported on in the due diligence exercise to make it of value to Piton Drilling and Engineering Services Limited. (7 Marks)

(d) Highlight the format of the due diligence report. (7 Marks)

Answer

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Tags: Business combination, Due diligence, External audit, Financial Viability, Report Formats
Level: Level 3

Topic: Assurance Engagements

AAA – Nov 2013 – L3 – A – Q10 – Assurance Engagements

This question assesses which elements are typically excluded from investigations related to investment decisions.

Question

Investigation under investment decision will NOT include:
A. Loan facility decision
B. Purchase of shares
C. Purchase of business
D. Reporting on profit forecast
E. Partnership participation

Answer

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Tags: Financial Analysis, Investigation, Investment Decision, Profit Forecast
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q6 – Assurance Engagements

This question assesses knowledge of assurance engagements and identifies an activity that is not an assurance engagement.

Question

The following are examples of assurance engagement, EXCEPT
A. Reporting on environmental performance
B. Carrying out statutory audit
C. Reviewing of accounting and internal control system
D. Reporting on statements of accounting policies and goodwill
E. Reviewing of corporate governance within an entity

Answer

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Tags: Assurance Engagement, Audit, Reporting Standards, Review
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q16 – Assurance Engagements

Identifies the linkage of responsible parties in assurance engagements to financial statement examination.

Question

To examine financial statements, in Assurance Engagements, “Responsible Parties” are linked to ………………

Answer

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Tags: Assurance engagements, Audit, Financial Statements, Responsible Parties, Stakeholders
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2012 – L3 – SA – Q2 – Assurance Engagements

Identifying non-objectives in profit forecast investigations by auditors.

Question

Which of the following is NOT an objective of profit forecast investigation on which an opinion can be given?
A. Whether or not the profit forecast complies with the Generally Accepted Accounting Principles
B. As to whether the profit forecast has been prepared on the basis of the existing organization’s accounting policies
C. Whether or not the profit forecast has been prepared on the basis of management assumptions and judgment
D. On the reasonableness of the management assumptions and judgment of the profit forecast
E. As to whether the profit forecast agrees with the underlying records

Answer

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Tags: Assurance, Compliance, GAAP, Profit Forecast, Regulatory Standards
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements

Definition of an assurance engagement's objective in providing confidence to users.

Question

An assignment in which the practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter is…………………………

Answer

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Tags: Assurance Engagement, Confidence Enhancement, Evaluation, Measurement
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements

Identifies an engagement type that does not qualify as an assurance engagement.

Question

Which ONE of the following is NOT an example of assurance engagement?

A. Reports for lenders and other investors
B. Reports on environmental performance
C. Reports and statement of accounting policies
D. Reports on corporate social responsibility performance
E. A private audit

Answer

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Tags: Assurance Engagement, Corporate Responsibility, Financial Reporting, Reporting Standards
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements

Identifies an item that may be excluded from an accountant’s report in a prospectus.

Question

The accountants’ report in a prospectus may not contain ONE of the following items:

A. Summarised balance sheet of the company for the last five years
B. Evaluation of quoted and unquoted investments
C. Principal accounting policies
D. Movement in share premium account
E. Particulars of preliminary expenses

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accountants' Report, Disclosure Requirements, Financial Reporting, Prospectus
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

Question

Required:

(a) Differentiate between due diligence report and external audit report. (3 Marks)

(b) Discuss the items you feel should be investigated or reported on in the due diligence exercise to make it of value to Piton Drilling and Engineering Services Limited. (7 Marks)

(d) Highlight the format of the due diligence report. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business combination, Due diligence, External audit, Financial Viability, Report Formats
Level: Level 3

Topic: Assurance Engagements

AAA – Nov 2013 – L3 – A – Q10 – Assurance Engagements

This question assesses which elements are typically excluded from investigations related to investment decisions.

Question

Investigation under investment decision will NOT include:
A. Loan facility decision
B. Purchase of shares
C. Purchase of business
D. Reporting on profit forecast
E. Partnership participation

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Analysis, Investigation, Investment Decision, Profit Forecast
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q6 – Assurance Engagements

This question assesses knowledge of assurance engagements and identifies an activity that is not an assurance engagement.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance Engagement, Audit, Reporting Standards, Review
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2012 – L3 – AII – Q16 – Assurance Engagements

Identifies the linkage of responsible parties in assurance engagements to financial statement examination.

Question

To examine financial statements, in Assurance Engagements, “Responsible Parties” are linked to ………………

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance engagements, Audit, Financial Statements, Responsible Parties, Stakeholders
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2012 – L3 – SA – Q2 – Assurance Engagements

Identifying non-objectives in profit forecast investigations by auditors.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance, Compliance, GAAP, Profit Forecast, Regulatory Standards
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2012

AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements

Definition of an assurance engagement's objective in providing confidence to users.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance Engagement, Confidence Enhancement, Evaluation, Measurement
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements

Identifies an engagement type that does not qualify as an assurance engagement.

Question

Which ONE of the following is NOT an example of assurance engagement?

A. Reports for lenders and other investors
B. Reports on environmental performance
C. Reports and statement of accounting policies
D. Reports on corporate social responsibility performance
E. A private audit

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance Engagement, Corporate Responsibility, Financial Reporting, Reporting Standards
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements

Identifies an item that may be excluded from an accountant’s report in a prospectus.

Question

The accountants’ report in a prospectus may not contain ONE of the following items:

A. Summarised balance sheet of the company for the last five years
B. Evaluation of quoted and unquoted investments
C. Principal accounting policies
D. Movement in share premium account
E. Particulars of preliminary expenses

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accountants' Report, Disclosure Requirements, Financial Reporting, Prospectus
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

Topic: Assurance Engagements

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AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

You're reporting an error for "AAA – May 2023 – L3 – Q4 – Assurance Engagements"

AAA – Nov 2013 – L3 – A – Q10 – Assurance Engagements

This question assesses which elements are typically excluded from investigations related to investment decisions.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q10 – Assurance Engagements"

AAA – Nov 2013 – L3 – A – Q6 – Assurance Engagements

This question assesses knowledge of assurance engagements and identifies an activity that is not an assurance engagement.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q6 – Assurance Engagements"

AAA – Nov 2012 – L3 – AII – Q16 – Assurance Engagements

Identifies the linkage of responsible parties in assurance engagements to financial statement examination.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q16 – Assurance Engagements"

AAA – Nov 2012 – L3 – SA – Q2 – Assurance Engagements

Identifying non-objectives in profit forecast investigations by auditors.

You're reporting an error for "AAA – Nov 2012 – L3 – SA – Q2 – Assurance Engagements"

AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements

Definition of an assurance engagement's objective in providing confidence to users.

You're reporting an error for "AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements"

AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements

Identifies an engagement type that does not qualify as an assurance engagement.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements"

AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements

Identifies an item that may be excluded from an accountant’s report in a prospectus.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements"

AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

You're reporting an error for "AAA – May 2023 – L3 – Q4 – Assurance Engagements"

AAA – Nov 2013 – L3 – A – Q10 – Assurance Engagements

This question assesses which elements are typically excluded from investigations related to investment decisions.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q10 – Assurance Engagements"

AAA – Nov 2013 – L3 – A – Q6 – Assurance Engagements

This question assesses knowledge of assurance engagements and identifies an activity that is not an assurance engagement.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q6 – Assurance Engagements"

AAA – Nov 2012 – L3 – AII – Q16 – Assurance Engagements

Identifies the linkage of responsible parties in assurance engagements to financial statement examination.

You're reporting an error for "AAA – Nov 2012 – L3 – AII – Q16 – Assurance Engagements"

AAA – Nov 2012 – L3 – SA – Q2 – Assurance Engagements

Identifying non-objectives in profit forecast investigations by auditors.

You're reporting an error for "AAA – Nov 2012 – L3 – SA – Q2 – Assurance Engagements"

AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements

Definition of an assurance engagement's objective in providing confidence to users.

You're reporting an error for "AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements"

AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements

Identifies an engagement type that does not qualify as an assurance engagement.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements"

AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements

Identifies an item that may be excluded from an accountant’s report in a prospectus.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements"

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