Types of assurance engagements

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2014 Can any one please explain the difference between Assertion based engagements and Direct reporting engagements with precise and real life example?
Definitions are to be excused. Live example with small narrative description is required.
Thank u in advance.

Querist : Anonymous

Querist : Anonymous (Querist)

24 December 2014 No one can answer my query?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

02 August 2025 Sure! Here’s a simple explanation with real-life examples for **Assertion-based engagements** and **Direct reporting engagements** in assurance:

---

### 1. **Assertion-Based Engagements**

* **What:** The client prepares a subject matter (like financial statements) and makes assertions about it (e.g., “These financial statements are true and fair”).
* **Auditor’s role:** The auditor **tests and verifies** those assertions and expresses an opinion on whether they are fairly stated.
* **Example:**
**Financial statement audit** — The company presents its balance sheet and profit & loss account, claiming they are accurate. The auditor checks the records, confirms this, and issues an audit report stating an opinion on those statements.

**Narrative:**
Imagine a company says, “Our sales this year were \$10 million.” As an auditor, you verify sales records, invoices, and receipts to confirm that \$10 million figure. Your report then gives assurance on the company’s claim.

---

### 2. **Direct Reporting Engagements**

* **What:** The auditor evaluates and reports directly on the subject matter without relying on client assertions.
* **Auditor’s role:** The auditor **collects evidence and forms their own conclusion** on the subject matter and reports that conclusion.
* **Example:**
**Report on compliance with environmental regulations** — The auditor inspects factory emissions data and directly reports whether the emissions comply with regulations, without the factory management first asserting compliance.

**Narrative:**
Suppose the government asks an auditor to check if a company is following pollution norms. The auditor gathers data independently, measures pollution levels, and reports directly on whether the company meets the standards, regardless of what the company claims.

---

**Summary:**

* Assertion-based: Auditor checks client’s claim.
* Direct reporting: Auditor forms own conclusion, no client claim involved.

---

Would you like me to share examples from other types of assurance engagements too?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now