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This is the second part of the sixth chapter in Arens 64. It answers specific questions related to auditing and assurance engagements. Auditing and assurance engagements are often performed for a wide variety of organizations that have financial reporting responsibilities to their investors or regulatory authorities, who require assurances that the financial statements the organizations provide are free from material misstatements before accepting them. The objectives for an audit engagement may relate to any or all of three sets of circumstances: (1) an audit pursuant to U.S. generally accepted auditing standards issued by the American Institute of Certified Public Accountants; (2) an audit, notwithstanding U.S. generally accepted auditing standards; and (3) an audit or similar review of a non-U.S. organization's financial statements. An audit may be performed to: Similarly, an assurance engagement may be performed to: 1. Access the quality of the design and implementation of the entity's internal control over financial reporting and testing compliance with laws and regulations related to the reporting entity's financial reporting; or 2. Access any other aspect of the quality of the design and implementation of the entity's internal control over financial reporting and testing compliance with laws and regulations related to the reporting entity's financial reporting. The engagement partner should discuss with the client certain aspects of the purpose for which an audit or assurance engagement is to be performed that relate to: 1. The importance or significance of the objectives to the client; and 2. The possible limitations on attesting to these objectives if they are not met. Whether conducting an audit or an assurance engagement, the engagement partner should also discuss with the client certain aspects of the matters to be addressed in the audit or assurance report. This discussion should include: 1. The nature, timing, and purpose of performing substantive procedures; and 2. The nature and extent of performing analytical procedures (such as trend analysis) or tests of controls (such as tests of controls using exception data). The client should be informed that analytical procedures are not necessarily indicators of substantive misstatements, but that they are useful in testing the operating effectiveness of internal control over financial reporting when used with other evidence. They can also help identify conditions that could lead to material misstatements when used with other evidence. In either instance, the engagement partner should discuss with the client those matters to be addressed in the audit or assurance report. This discussion should include: 1. How the audit or assurance report will address the objectives of an audit or assurance engagement and how it will satisfy requirements for a scope limitation exception; and 2. The nature and timing of providing interim communication about any circumstances that develop during the course of performing an audit or an assurance engagement that might have a significant adverse effect on estimates of liability, assets, or intended use of net assets included in financial statements if they were not corrected. cfa1e77820
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