FAQs
Q. To whom can the ICAEW Assurance Service be offered?
A. The ICAEW Assurance Service can be offered to audit-exempt companies. Following the increase in the audit exemption threshold in 2004, many companies with a turnover below £5.6 million are no longer required to have a statutory audit of their financial statements although some still choose to do so. As an alternative, directors may however wish to have an independent assurance report on their accounts from chartered accountants in order to enhance the credibility of the financial information in the accounts.
The ICAEW Assurance Service principally applies to accounts prepared in accordance with the Companies Act 1985 (or, when effective, the Companies Act 2006). The general principles that underpin the service may also be useful in relation to similar engagements on historical financial statements prepared for limited liability partnerships, or under legislation other than the Companies Act.
Q. What differentiates the ICAEW Assurance Service from accounts compilation?
A. The expression of a conclusion separates the ICAEW Assurance Service from engagements to compile accounts. Accountants perform the ICAEW Assurance Service to express a conclusion on the annual accounts, whilst accountants compiling the accounts express no conclusion on the information in the accounts.
Q. How does the ICAEW Assurance Service differ from audits?
A. Both the audit and the ICAEW Assurance Service are types of assurance engagements. In audits, accountants give a positive conclusion in the form of an audit opinion on the accounts. By contrast, in the ICAEW Assurance Service, accountants give a negative form of conclusion on the unaudited financial statements. Accountants performing audits comply with International Standards on Auditing (ISAs) (UK and Ireland), whereas accountants performing the ICAEW Assurance Service follow the ICAEW guidance AAF 03/06 The ICAEW Assurance Service on unaudited financial statements (PDF 119kb/28 pages). The primary source of reference in the development of AAF 03/06 is the International Framework for Assurance Engagements, which was issued by the International Auditing and Assurance Standards Board (IAASB) in 2004.
Q. What do accountants do when performing the ICAEW Assurance Service?
A. During this type of engagement, chartered accountants principally make enquiries of management and directors, apply analytical procedures to the accounts and assess whether the applied accounting policies are appropriate to the circumstances and adequately disclosed. They may perform some examination of evidence relevant to certain balances and disclosures in the financial statements. This is, however, limited to situations where, after performing analytical procedures, enquiring of management and assessing the accounting policies, accountants have become aware of matters that might indicate a risk of material misstatement in the accounts.
Q. What are the ethical requirements for accountants who perform the ICAEW Assurance Service?
A. In carrying out an assurance engagement other than an audit, accountants who are members of the ICAEW are subject to the ethical guidance as laid down by the ICAEW Code of Ethics. The requirements in the Code include, among other things, adherence to the Fundamental Principles in all professional and business activities. There are additional requirements in Independence for Assurance Engagements within the Code. This applies to all assurance engagements outside the scope of audit and is in compliance with the Code of Ethics established by the International Federation of Accountants (IFAC).