HKSAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information

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HKSAE 3000 Assurance Engagements Explained

HKSAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information

HKSAE 3000 (Revised) "Assurance Engagements Other Than Audits or Reviews of Historical Financial Information" is a Hong Kong Standard on Assurance Engagements (HKSAE) issued by the Hong Kong Institute of Certified Public Accountants (HKICPA). This standard deals with assurance engagements other than audits or reviews of historical financial information, which are covered by Hong Kong Standards on Auditing (HKSAs) and Hong Kong Standards on Review Engagements (HKSREs) respectively.

Here's a breakdown of the key aspects of HKSAE 3000:

Objective:

• To establish basic principles and essential procedures for, and to provide guidance to, professional accountants in public practice (referred to as practitioners) for the performance of assurance engagements other than audits or reviews of historical financial information.   

• 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 against criteria.   

Scope:

• Applies to all assurance engagements other than audits or reviews of historical financial information. This includes engagements such as:

  • Reviews of internal controls

  • Due diligence engagements

  • Examination of prospective financial information (although HKSAE 3400 provides specific guidance for these)

  • Sustainability or ESG reporting engagements

  • Compliance engagements

  • Performance measurement engagements

• It is to be read in the context of the "Framework for Assurance Engagements."

Key Principles and Requirements:

• Ethics and Quality Control: Practitioners must comply with relevant ethical requirements, including independence, and should implement quality control procedures at the firm and engagement level.

• Engagement Acceptance and Continuance: Practitioners should only accept or continue an engagement when the preconditions for an assurance engagement are present, including having a rational purpose, the responsible party acknowledging their responsibility, and the subject matter being identifiable and the criteria suitable and available.

• Agreeing the Terms of the Engagement: The terms of the engagement should be agreed upon with the engaging party and documented in an engagement letter.

• Planning and Risk Assessment: Practitioners need to adequately plan the engagement to ensure it is performed effectively and efficiently. This includes understanding the subject matter and assessing the risks of material misstatement.

• Evidence: Practitioners should obtain sufficient appropriate evidence to support their conclusion. The nature, timing, and extent of procedures performed will vary depending on the level of assurance (reasonable or limited) and the specific circumstances of the engagement.

• Using the Work of an Expert: When necessary, practitioners may use the work of experts, and they need to assess the expert's competence, capabilities, and objectivity.

• Materiality: Practitioners should consider materiality when planning and performing the engagement and in evaluating the outcome.

• Documentation: Engagement documentation should be prepared that is sufficient to enable an experienced auditor, having no previous connection with the engagement, to understand the nature, timing, extent, and results of the procedures performed, the evidence obtained, and significant matters arising during the engagement and the conclusions reached thereon.   

• Forming an Opinion and Reporting: The practitioner expresses a conclusion that provides either reasonable or limited assurance about the subject matter information. The assurance report should be in writing and contain specific elements, including identification of the subject matter, criteria used, the practitioner's conclusion, and the level of assurance provided.

Levels of Assurance:

• Reasonable Assurance: A high, but not absolute, level of assurance. The conclusion is expressed in a positive form (e.g., "In our opinion... is fairly presented, in all material respects...").

• Limited Assurance: A lower level of assurance than a reasonable assurance engagement. The conclusion is expressed in a negative form (e.g., "Based on our work performed, nothing has come to our attention that causes us to believe that... is not fairly presented, in all material respects...").

Relationship with International Standards:

• HKSAE 3000 (Revised) is based on the International Standard on Assurance Engagements (ISAE) 3000 (Revised) issued by the International Auditing and Assurance Standards Board (IAASB).   

In summary, HKSAE 3000 provides the fundamental principles and guidance for performing a wide range of assurance engagements beyond traditional financial statement audits and reviews, aiming to enhance the credibility of the subject matter information for its intended users.

How Professional Accountants in Public Practice (Practitioners) can Help

Professional accountants in public practice (practitioners), guided by HKSAE 3000 (Revised), can help organizations and other stakeholders in numerous ways beyond just auditing financial statements. Their expertise in assurance engagements allows them to provide independent and objective assessments on a wide range of subject matters, enhancing trust and confidence. Here's how they can help:

1. Enhancing Credibility and Trust:

• Providing Assurance on Non-Financial Information: Practitioners can provide assurance on sustainability reports, environmental, social, and governance (ESG) disclosures, internal controls, compliance with regulations, and performance metrics. This helps stakeholders (investors, customers, regulators, etc.) gain confidence in the reliability and accuracy of this information.

• Independent and Objective Assessment: Their professional objectivity and adherence to ethical standards ensure an unbiased evaluation of the subject matter. This independence adds significant credibility to the information being reported.

2. Improving Internal Processes and Controls:

• Reviewing and Reporting on Internal Controls: Practitioners can conduct engagements to evaluate the design and operating effectiveness of internal controls over financial reporting, operational efficiency, or compliance. Their recommendations can help organizations strengthen their control environment and mitigate risks.

• Identifying Areas for Improvement: Through their detailed examination, practitioners can identify weaknesses or inefficiencies in processes and provide valuable insights for improvement.

3. Supporting Decision-Making:

• Due Diligence Engagements: In mergers, acquisitions, or other business transactions, practitioners can perform due diligence engagements to provide an independent assessment of financial, operational, or other relevant information, helping clients make informed decisions.

• Prospective Financial Information Examination: While HKSAE 3400 provides specific guidance, practitioners can examine prospective financial information (forecasts and projections) to provide assurance on the reasonableness of assumptions and the preparation of the information. This aids stakeholders in evaluating future prospects.

• Performance Measurement Engagements: Practitioners can assist organizations in developing relevant performance indicators and provide assurance on the accuracy and reliability of reported performance against these metrics. This helps stakeholders assess the organization's success in achieving its objectives.

4. Ensuring Compliance:

• Compliance Engagements: Practitioners can perform engagements to assess an organization's compliance with specific laws, regulations, contractual obligations, or internal policies. This provides assurance to stakeholders that the organization is operating within the required frameworks.

5. Facilitating Transparency and Accountability:

• Independent Reporting: The assurance reports issued by practitioners provide a clear and independent opinion or conclusion on the subject matter, enhancing transparency and accountability to stakeholders.

• Clear Communication of Findings: Practitioners are trained to communicate their findings and conclusions in a clear, concise, and understandable manner.

6. Adapting to Evolving Reporting Landscapes:

• Providing Assurance on Emerging Reporting Areas: As reporting requirements evolve (e.g., climate-related disclosures), practitioners can apply the principles of HKSAE 3000 to provide assurance on these new forms of information, helping organizations meet stakeholder expectations.

In essence, professional accountants in public practice, through the application of HKSAE 3000 (Revised), act as trusted advisors who provide independent and objective assurance on a wide array of subject matters. This helps organizations build trust with their stakeholders, improve their internal processes, make informed decisions, and navigate an increasingly complex reporting environment.

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