5 Elements of Assurance Engagement: All You Should Know

An assurance engagement is a type of assignment performed by a practitioner in order to express an opinion about a subject matter against criteria. Usually, this engagement allows the users to base their decisions and obtain confidence over the measurement of the given subject matter. However, the criteria for each assurance engagement may differ from another.

An audit engagement is a primary example of an assurance engagement. Usually, an auditor expresses their opinion of whether the client’s financial statements are free from material misstatements. Auditors measure it against a given framework that applies to their specific client. In this case, the others parties involved include the client and its stakeholders.

What are the Five Elements of Assurance Engagement?

Every assurance engagement must include 5 elements. These elements determine the scope of the engagement and also defines the parties involved. Before any assurance engagement, therefore, all parties must establish what each of these five elements is. These include the following.

1. Existence of a Three-Party Relationship

This is the first of the 5 elements to any assurance engagement is the existence of a relationship between the three parties involved. For most audit engagements, these three parties include the intended users, the client’s management, and the auditors. The intended users are the client’s stakeholders who will receive and use the report provided by the auditors. Most importantly, it includes the business’ shareholders or owners.

The management is the party responsible for helping auditors with the engagement. However, it is also the party that is under scrutiny by the auditors. The client’s shareholders assign auditors to measure whether the financial statements present a fair picture of the company’s operations. Overall, the management is responsible for preparing the financial statements and any responsibility that comes with them.

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Lastly, the auditor is the party that uses their professional judgment to measure the management’s presentation. It includes a professional audit firm that audits the client’s financial statements and ultimately provides their opinion of whether these present a true and fair view. In most cases, auditors provide limited assurance services.

2. Subject Matter

Every assurance engagement has a well-defined subject matter. This subject matter is the material that the responsible party provides. It is also the material on which auditors need to provide their opinion. This subject matter may vary according to the type of assurance engagement. In most cases, the subject matter is the financial statements prepared by the client’s management.

The subject matter should meet some criteria for assurance engagements. Firstly, it needs to be identifiable and capable of consistent evaluation or measurement. Similarly, the information provided in the subject matter must have appropriate evidence to back it. If any subject matter does not meet these criteria, it cannot be a part of the assurance engagement.

3. Suitable Criteria

The existence of a subject matter isn’t the only crucial element involved in assurance engagements. The involved parties must also establish suitable criteria against which practitioners can evaluate the provided subject matter. In most cases, the conditions may include financial standards that clients must abide by when preparing their financial statements.

The suitable criteria for each engagement may differ. It is one of the primary differentiating factors between various types of assurance engagements. In most cases, clients may set suitable criteria according to the jurisdiction where they operate. Usually, it includes the financial reporting framework that applies to businesses and companies.

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4. Sufficient Appropriate Evidence

As mentioned above, the subject matter should come with evidence-based on which practitioners can provide their opinion. In the absence of such evidence, practitioners cannot confirm the information provided in a given subject matter. Therefore, all assurance engagements need to have sufficient appropriate evidence that can back the provided information.

The sufficiency of evidence relates to its quantity, while appropriateness comes from quality. By gathering this evidence, the practitioner can measure whether the provided information is accurate and complete. Similarly, they may also measure it against other criteria to ensure that the subject matter presents a true picture. The responsibility for providing such evidence lies on the management.

5. Written Assurance Report

The last element that any assurance engagement will have is a written assurance report. It is the outcome that the client receives and the practitioner presents. As mentioned above, the practitioner examines the subject matter against given criteria and gathers sufficient and appropriate evidence. Based on that, they provide their opinion of the subject matter through a written assurance report.

For external auditors, the written assurance report comes in the form of an audit report. For other assurance engagements, this report may differ. Usually, practitioners provide reasonable or limited assurance. Based on this report, the users can then make decisions. Overall, a written assurance report represents the final outcome for any assurance engagement.


An assurance engagement involves an assignment performed by a practitioner to express an opinion about a subject matter. Usually, the practitioner examines the subject matter against given criteria. There are 5 elements that are crucial to any assurance engagement. These include the existence of a three-party relationship, a subject matter, suitable criteria, sufficient appropriate evidence, and a written assurance report.

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