Audit & Assurance

Martin Le Marchant


Quality Assurance

Assurance services include an audit, a review, or agreed-upon-procedures. Each of these services may be undertaken by an independent auditor however the assurance afforded to the user differs substantially.  

An audit is:  

“The independent evaluation of the financial report of an organisation”.  

The purpose of an audit is: 

“To enhance confidence for intended users of the financial report that it is free from material error in accordance with an applicable reporting framework”. 

The level of assurance provided in an audit is reasonable – that is, a high level of assurance.  

what is a review

A review is: 

“The independent evaluation of an organisation’s financial data. This financial data could be a complete financial report or a specific area of concern or focus. 

The purpose of a review is 

“To enhance confidence for intended users of the financial report (or data) by evaluating and concluding whether anything has come to the auditor’s attention that the financial report (or data) is not free from material error in accordance with an applicable reporting framework.” 

A review differs substantially from an audit. Review engagements provide less assurance to the user of the financial statements because the auditor performs less procedures than would be completed had an audit been undertaken. 

An agreed-upon-procedures (AUP) engagement is:

A professional engagement in which an auditor agrees with the client to perform specific procedures with respect to financial information.” 

The purpose of an AUP is:

“To meet the specific needs of users that an audit cannot address.” 

An AUP differs from an audit or review in that the client (engaging party) discusses their needs with the auditor and the specific procedures to be performed to meet their needs. The auditor issues a report detailing the findings from performing the agreed procedures. The level of assurance in an AUP depends on the nature of engagement and the procedures performed: it’s important to note the auditor will not express an opinion or conclusion. Rather, the client will form their own view based on the content and findings included in the report. 

Comparison of assurance services 

The differences between assurance services is outlined in the following table:


Engagement Type  Audit  Review  AUP 
Assurance  Reasonable / High  Limited /   None / restricted  
Standards Applied  Australian Auditing Standards  Australian Standards on Review Engagements 

E.g. ASRE 2410 

Australian Standards on Related Services 

E.g. ASRS 4400 

Example conclusion  ‘… the financial statements present a true and fair view…’  ‘… we have not become aware of a matter to cause us to believe the financial statements do not present a true and fair view…’  Restricted use report based on the agreed procedure. For example: 

‘… The creditor balance did not agree to the confirmation…’ 

Efforts by the auditor  Risk assessment  

and audit  

procedures that  

respond to the  

risks identified. Detailed testing and substantiation of reported balances.  

Primarily inquiry  

and analytical  


Obtaining evidence to support factual findings 


When is an audit assurance service appropriate? 

An audit provides a high level of assurance. Accordingly, an audit is likely to be appropriate in the following circumstances: 

  • Laws or regulations require an audit. This is common for entities reporting under the Corporations Act or Australian Charities and Not-for-profits Commission Act. 
  • Financial statement users (e.g., investors) request a highest level of assurance  
  • External users (such as creditors or financiers) or circumstances (such as when preparing to sell a business)require an audit to provide assurance on the financial position and performance of a business.  

What are the potential benefits of an audit assurance service? 

An audit provides benefits including: 

  • Enhanced credibility of the information contained in the financial statements.  
  • Identification of potential misstatements (whether due to error or fraud) for action and remediation by the entity. 
  • Weaknesses in internal control may be identified; 
  • Insights into business risk and other exposures along with recommendations for improvement 
  • Identify and resolve commercial issues and improve your business processes. 
  • Reduce risk and improve operational performance. 
  • Secure peace of mind knowing statutory obligations are met. 

When is a review assurance service appropriate? 

A review provides limited assurance. Accordingly, a review is likely to be appropriate in the following circumstances: 

  • The entity is exempt from a statutory audit requirement, but users (e.g. members, shareholders, or lenders) require some form of assurance. 
  • A review provides an additional control to a business for management and owners. 
  • Subsidiaries who are part of a group which are not subject to audit.  
  • To fulfil statutory or contractual obligations. For example, certain entities such as Australian listed companies and registered schemes must prepare a financial report for each half year. This half-year report (sometimes called an interim financial report) contains a
    • balance sheet,
    • an income statement,
    • a statement of changes in equity,
    • a cash flow statement,
    • and limited notes comprising a summary of significant accounting policies and other explanatory notes.

These disclosures however are generally less detailed than those included in the annual financial report.  

What are the potential benefits of a review assurance service? 

A review potentially provides the following benefits: 

  • Allow a growing business to prepare for transition to an audit as part of its future compliance commitments.  
  • Obtain finance, be part of an acquisition or divestment due diligence or seeking additional investors. 
  • Be targeted and flexible -allowing efforts to be directed to key areas of concern or attention.  
  • Identify and resolve commercial issues and improve your business processes. 
  • Reduce risk and improve operational performance. 
  • Generally cost less than an audit.  
  • For certain entities, peace of mind knowing statutory obligations are met. 

When is an AUP assurance service appropriate? 

An AUP assurance service does not provide an opinion. Rather, a report is produced which includes the procedures performed and the findings arising therefrom. The report is not distributed publicly – that is, it’s restricted to those parties who have agreed upon the procedures. Accordingly, an AUP engagement is likely to be appropriate in the following circumstances: 

  • Management want to focus on specific areas of financial information to satisfy external user’s needs. This includes confirming accounts receivable or payables balances, verifying cash balances, substantiating inventory balances etc.  
  • The undertaking of specific procedures in connection with a business acquisition or divestment.  
  • The board or management seek comfort that certain disclosures or processes required by applicable standards, regulations or internal protocols have been provided and/or adhered to. 

What are the potential benefits of an AUP assurance service? 

An AUP potentially provides the following benefits: 

  • It’s targeted and flexible -allowing efforts to be directed to key areas of concern or attention on specific financial data. 
  • Satisfies certain financial, customer or supplier requirements in business transactions.  
  • The users can request specific work to be undertaken. This includes also specifying the format of reporting relating to the procedures complete 
  • An AUP report can be appended to other reported information to further add credibility and transparency.   

In short, regardless of whether your organisation is required to have an audit, it can be good practice to undertake. An audit on your financial report will provide clarity and reliable in-depth results. 

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