ISAE (NZ) 3000 (Revised)

1. This International Standard on Assurance Engagements (New Zealand) (ISAE (NZ)) deals with assurance engagements other than audits or reviews of historical financial information, which are dealt with in International Standards on Auditing (New Zealand) (ISAs (NZ)), International Standard on Review Engagement (New Zealand) (ISRE (NZ)) and New Zealand Standard on Review Engagement (NZ SRE) respectively. (Ref: Para. A21-A22)

2. Assurance engagements include both attestation engagements, in which a party other than the assurance practitioner measures or evaluates the underlying subject matter against the criteria, and direct engagements, in which the assurance practitioner measures or evaluates the underlying subject matter against the criteria. This ISAE (NZ) contains requirements and application and other explanatory material specific to reasonable and limited assurance attestation engagements. This ISAE (NZ) may also be applied to reasonable and limited assurance direct engagements, adapted and supplemented as necessary in the engagement circumstances.

3. This ISAE (NZ) is premised on the basis that:

1. The members of the engagement team and the engagement quality reviewer (for those engagements where one has been appointed) are subject to Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) related to assurance engagements or other professional requirements, or requirements in law or regulation, that are at least as demanding; and (Ref: Para. A30-A34)

2. The assurance practitioner who is performing the engagement is a member of a firm that is subject to Professional and Ethical Standard 3¹ or other professional requirements, or requirements in law or regulation, regarding the firm’s responsibility for its system of quality management, that are at least as demanding as Professional and Ethical Standard 3. (Ref: Para. A61–A66)

4. Quality management within firms that perform assurance engagements, and compliance with ethical principles, including independence requirements, are widely recognised as being in the public interest and an integral part of high quality assurance engagements. Assurance practitioners will be familiar with such requirements. If a competent assurance practitioner other than a member of a professional accounting body in public practice chooses to represent compliance with this or other ISAEs (NZ), it is important to recognise that this ISAE (NZ) includes requirements that reflect the premise in the preceding paragraph.

5. This ISAE (NZ) covers assurance engagements other than audits or reviews of historical financial information. Where a subject-matter specific ISAE (NZ) or Standard on Assurance Engagements (SAE) is relevant to the subject matter of a particular engagement, that ISAE (NZ) or SAE applies in addition to this ISAE (NZ). (Ref: Para. A21–A22)

6. Not all engagements performed by assurance practitioners are assurance engagements. Other frequently performed engagements that are not assurance engagements, as defined by paragraph 12(a) (and therefore are not covered by the ISAEs (NZ) or SAEs) include:

1. Engagements such as agreed-upon procedures and compilation engagements;

2. The preparation of tax returns where no assurance conclusion is expressed; and

3. Consulting (or advisory) engagements, such as management and tax consulting. (Ref: Para A1)

7. An assurance engagement performed under the ISAEs (NZ) or SAEs may be part of a larger engagement. In such circumstances, the ISAEs (NZ) or SAEs are relevant only to the assurance portion of the engagement.

8. The following engagements, which may be consistent with the description in paragraph 12(a), are not considered assurance engagements in terms of the ISAEs (NZ) or SAEs:

1. Engagements to testify in legal proceedings regarding accounting, auditing, taxation or other matters; and

2. Engagements that include professional opinions, views or wording from which a user may derive some assurance, if all of the following apply:

   1. Those opinions, views or wording are merely incidental to the overall engagement;

   2. Any written report issued is expressly restricted for use by only the intended users specified in the report;

   3. Under a written understanding with the specified intended users, the engagement is not intended to be an assurance engagement; and

   4. The engagement is not represented as an assurance engagement in the assurance practitioner’s report.

9. [Amended by the NZAuASB.]

NZ9.1 This ISAE (NZ) is effective for assurance engagements beginning on or after 1 January 2015.

Early adoption is permitted.

NZ9.2 This ISAE (NZ) supersedes International Standard on Assurance Engagements (New Zealand) 3000, Assurance Engagements Other than Audits or Reviews of Historical Financial Information.

10. In conducting an assurance engagement, the objectives of the assurance practitioner are:

1. To obtain either reasonable assurance or limited assurance, as appropriate, about whether the subject matter information is free from material misstatement;

2. To express a conclusion regarding the outcome of the measurement or evaluation of the underlying subject matter through a written report that conveys either a reasonable assurance or a limited assurance conclusion and describes the basis for the conclusion; (Ref: Para. A2) and

3. To communicate further as required by this ISAE (NZ) and any other relevant ISAEs (NZ) or SAEs.

11. In all cases when reasonable assurance or limited assurance, as appropriate, cannot be obtained and a qualified conclusion in the assurance practitioner’s assurance report is insufficient in the circumstances for purposes of reporting to the intended users, this ISAE (NZ) requires that the assurance practitioner disclaim a conclusion or withdraw (or resign) from the engagement, where withdrawal is possible under applicable law or regulation.

12. For purposes of this ISAE (NZ) and other ISAEs (NZ) or SAEs, unless indicated to the contrary, the following terms have the meanings attributed below. (Ref: Para. A27)

NZ12.1 Assurance practitioner―A person or an organisation whether in public practice, industry, commerce or the public sector, appointed or engaged to undertake assurance engagements. Where this ISAE (NZ) expressly intends that a requirement or responsibility be fulfilled by the lead assurance practitioner, the term “lead assurance practitioner” rather than “assurance practitioner” is used. (Ref: Para. A37)

NZ12.2 Assurance practitioner’s expert―An individual or organisation possessing expertise in a field other than assurance, whose work in that field is used by the assurance practitioner to assist the assurance practitioner in obtaining sufficient appropriate evidence. An assurance practitioner’s expert may be either an assurance practitioner’s internal expert (who is a partner or staff, including temporary staff, of the assurance practitioner’s firm or a network firm), or an assurance practitioner’s external expert.

NZ12.3 Lead assurance practitioner – The assurance practitioner or other individual, appointed by the firm who is responsible for the engagement and its performance, and for the assurance report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body. The “lead assurance practitioner” should be read as referring to public sector equivalents where relevant.

13. For the purposes of this ISAE (NZ) and other ISAEs (NZ) or SAEs, references to “appropriate party(ies)” should be read hereafter as “the responsible party, the measurer or evaluator, or the engaging party, as appropriate.” (Ref: Para. A20, A37)

14. The assurance practitioner shall comply with this ISAE (NZ) and any subject matter-specific ISAEs (NZ) or SAE relevant to the engagement.

15. The assurance practitioner shall not represent compliance with this or any other ISAE (NZ) or SAE unless the assurance practitioner has complied with the requirements of this ISAE (NZ) and any other ISAE (NZ) or SAE relevant to the engagement. (Ref: Para. A21– A22, A171)

16. The assurance practitioner shall have an understanding of the entire text of an ISAE (NZ) or SAE, including its application and other explanatory material, to understand its objectives and to apply its requirements properly. (Ref: Para. A23–A28)

17. Subject to the following paragraph, the assurance practitioner shall comply with each requirement of this ISAE (NZ) and of any relevant subject matter-specific ISAE (NZ) or SAE unless, in the circumstances of the engagement the requirement is not relevant because it is conditional and the condition does not exist. Requirements that apply to only limited assurance or reasonable assurance engagements have been presented in a columnar format with the letter “L” (limited assurance) or “R” (reasonable assurance) after the paragraph number (Ref: Para. A29).

18. In exceptional circumstances, the assurance practitioner may judge it necessary to depart from a relevant requirement in an ISAE (NZ). In such circumstances, the assurance practitioner shall perform alternative procedures to achieve the aim of that requirement. The need for the assurance practitioner to depart from a relevant requirement is expected to arise only where the requirement is for a specific procedure to be performed and, in the specific circumstances of the engagement, that procedure would be ineffective in achieving the aim of the requirement.

19. If an objective in this ISAE (NZ) or a relevant subject matter-specific ISAE (NZ) cannot be achieved, the assurance practitioner shall evaluate whether this requires the assurance practitioner to modify the assurance practitioner’s conclusion or withdraw from the engagement (where withdrawal is possible under applicable law or regulation). Failure to achieve an objective in a relevant ISAE (NZ) represents a significant matter requiring documentation in accordance with paragraph 79 of this ISAE (NZ).

20. The assurance practitioner shall comply with the provisions of Professional and Ethical Standard 1² related to assurance engagements, or other professional requirements, or requirements imposed by law or regulation, that are at least as demanding. (Ref: Para. A30- A34, A60)

21. The lead assurance practitioner shall be satisfied that the firm’s policies or procedures for the acceptance and continuance of client relationships and assurance engagements have been followed by the firm, and shall determine that conclusions reached in this regard are appropriate.

22. The assurance practitioner shall accept or continue an assurance engagement only when: (Ref: Para. A30–A34)

1. The assurance practitioner has no reason to believe that relevant ethical requirements, including independence, will not be satisfied;

2. The assurance practitioner is satisfied that those persons who are to perform the engagement collectively have the appropriate competence and capabilities, including having sufficient time to perform the engagement (see also paragraph 32); and

3. The basis upon which the engagement is to be performed has been agreed, through:

   1. Establishing that the preconditions for an assurance engagement are present (see also paragraphs 24–26); and

   2. Confirming that there is a common understanding between the assurance practitioner and the engaging party of the terms of the engagement, including the assurance practitioner’s reporting responsibilities.

23. If the lead assurance practitioner obtains information that may have caused the firm to decline the engagement had that information been known by the firm prior to accepting or continuing the client relationship or specific engagement, the lead assurance practitioner shall communicate that information promptly to the firm, so that the firm and the lead assurance practitioner can take the necessary action.

24. In order to establish whether the preconditions for an assurance engagement are present, the assurance practitioner shall, on the basis of a preliminary knowledge of the engagement circumstances and discussion with the appropriate party(ies), determine whether: (Ref: Para. A35-A36)

1. The roles and responsibilities of the appropriate parties are suitable in the circumstances; and (Ref: Para. A37–A39)

2. The engagement exhibits all of the following characteristics:

   1. The underlying subject matter is appropriate; (Ref: Para. A40–A44)

   2. The criteria that the assurance practitioner expects to be applied in the preparation of the subject matter information are suitable for the engagement circumstances, including that they exhibit the following characteristics: (Ref: Para. A45–A50)

      1. Relevance.

      2. Completeness.

      3. Reliability.

      4. Neutrality.

      5. Understandability.

   3. The criteria that the assurance practitioner expects to be applied in the preparation of the subject matter information will be available to the intended users; (Ref: Para. A51– A52)

   4. The assurance practitioner expects to be able to obtain the evidence needed to support the assurance practitioner’s conclusion; (Ref: Para. A53–A55)

   5. The assurance practitioner’s conclusion, in the form appropriate to either a reasonable assurance engagement or a limited assurance engagement, is to be contained in a written report; and

   6. A rational purpose including, in the case of a limited assurance engagement, that the assurance practitioner expects to be able to obtain a meaningful level of assurance. (Ref: Para. A56)

25. If the preconditions for an assurance engagement are not present, the assurance practitioner shall discuss the matter with the engaging party. If changes cannot be made to meet the preconditions, the assurance practitioner shall not accept the engagement as an assurance engagement unless required by law or regulation to do so. However, an engagement conducted under such circumstances does not comply with ISAEs (NZ). Accordingly, the assurance practitioner shall not include any reference within the assurance report to the engagement having been conducted in accordance with this ISAE (NZ) or any other ISAE(s) (NZ) or SAE.

26. If the engaging party imposes a limitation on the scope of the assurance practitioner’s work in the terms of a proposed assurance engagement such that the assurance practitioner believes the limitation will result in the assurance practitioner disclaiming a conclusion on the subject matter information, the assurance practitioner shall not accept such an engagement as an assurance engagement, unless required by law or regulation to do so. (Ref: Para. A156(c))

27. The assurance practitioner shall agree the terms of the engagement with the engaging party. The agreed terms of the engagement shall be specified in sufficient detail in an engagement letter or other suitable form of written agreement, written confirmation, or in law or regulation. (Ref: Para. A57– A58)

28. On recurring engagements, the assurance practitioner shall assess whether circumstances require the terms of the engagement to be revised and whether there is a need to remind the engaging party of the existing terms of the engagement.

29. The assurance practitioner shall not agree to a change in the terms of the engagement where there is no reasonable justification for doing so. If such a change is made, the assurance practitioner shall not disregard evidence that was obtained prior to the change. (Ref: Para. A59)

30. In some cases, law or regulation of the relevant jurisdiction prescribes the layout or wording of the assurance report. In these circumstances, the assurance practitioner shall evaluate:

1. Whether intended users might misunderstand the assurance conclusion; and

2. If so, whether additional explanation in the assurance report can mitigate possible misunderstanding.

If the assurance practitioner concludes that additional explanation in the assurance report cannot mitigate possible misunderstanding, the assurance practitioner shall not accept the engagement, unless required by law or regulation to do so. An engagement conducted in accordance with such law or regulation does not comply with ISAEs (NZ). Accordingly, the assurance practitioner shall not include any reference within the assurance report to the engagement having been conducted in accordance with this ISAE (NZ) or any other ISAE(s) (NZ) or SAE (See also paragraph 71).

31. The lead assurance practitioner shall:

1. Be a member of a firm that applies Professional and Ethical Standard 3³, or other professional requirements, or requirements in law or regulation, that are at least as demanding as Professional and Ethical Standard 3; (Ref: Para. A60–A66)               Engagement Resources(aa) Determine that sufficient and appropriate resources to perform the engagement are assigned or made available to the engagement team in a timely manner, taking into account the nature and circumstances of the engagement, the firm’s policies or procedures, and any changes that may arise during the engagement.

2. Have competence in assurance skills and techniques developed through extensive training and practical application; and (Ref: Para. A60)

3. Have sufficient competence in the underlying subject matter and its measurement or evaluation to accept responsibility for the assurance conclusion. (Ref: Para. A67–A68)

32. The lead assurance practitioner shall: (Ref: Para. A69)

1. Be satisfied that those persons who are to perform the engagement collectively have the appropriate competence and capabilities, including having sufficient time to: (Ref: Para. A70–A71)

   1. Perform the engagement in accordance with relevant standards and applicable legal and regulatory requirements; and

   2. Enable an assurance report that is appropriate in the circumstances to be issued.

2. Be satisfied that the assurance practitioner will be able to be involved in the work of:

   1. An assurance practitioner’s expert where the work of that expert is to be used; and (Ref: Para. A70–A71)

   2. Another assurance practitioner, not part of the engagement team, where the assurance work of that assurance practitioner is to be used, (Ref: Para. A72–A73)

to an extent that is sufficient to accept responsibility for the assurance conclusion on the subject matter information.

33. The lead assurance practitioner shall take overall responsibility for managing and achieving quality on the engagement and being sufficiently and appropriately involved throughout the engagement. This includes responsibility for:

1. Being satisfied that the firm’s policies or procedures for the acceptance and continuance of client relationships and assurance engagements have been followed;

2. The engagement being planned and performed (including appropriate direction and supervision of engagement team members) in accordance with professional standards and applicable legal and regulatory requirements;

3. Reviews being performed in accordance with the firm’s policies or procedures, and reviewing the engagement documentation on or before the date of the assurance report; (Ref: Para. A74- NZA74.3)

4. Appropriate engagement documentation being maintained to provide evidence of achievement of the assurance practitioner’s objectives, and that the engagement was performed in accordance with relevant ISAEs (NZ), SAE and relevant legal and regulatory requirements; and

5. Appropriate consultation being undertaken by the engagement team on difficult or contentious matters.

NZ33.1 The lead assurance practitioner shall form a conclusion on compliance with independence requirements that apply to the engagement. In doing so, the lead assurance practitioner shall:

1. Obtain relevant information from the firm and, where applicable, network firms and experts used, to identify and evaluate circumstances and relationships that create threats to independence;

2. Evaluate information on identified breaches, if any, of the firm’s independence policies or procedures to determine whether they create a threat to independence for the assurance engagement; and

3. Take appropriate action to eliminate such threats or reduce them to an acceptable level by applying safeguards, or, if considered appropriate, to withdraw from the engagement, where withdrawal is possible under applicable law or regulation. The lead assurance practitioner shall promptly report to the firm any inability to resolve the matter for appropriate action.

34. Throughout the engagement, the lead assurance practitioner shall remain alert, through observation and making enquiries as necessary, for evidence of breaches of relevant ethical requirements by members of the engagement team. If matters come to the lead assurance practitioner’s attention through the firm’s system of quality management or otherwise that indicate that members of the engagement team have breached relevant ethical requirements, the lead assurance practitioner, in consultation with others in the firm, shall determine the appropriate action.

35. The lead assurance practitioner shall consider the information from the firm’s monitoring and remediation process as communicated by the firm and, if applicable, other network firms and whether the information may affect the assurance engagement.

36. For those engagements, if any, for which an engagement quality review is required in accordance with Professional and Ethical Standard 3 or the firm’s policies or procedures, the lead assurance practitioner shall discuss significant matters and significant judgements arising during the engagement with the engagement quality reviewer, and not date the assurance report until completion of that review.⁴

37. The assurance practitioner shall plan and perform an engagement with professional scepticism, recognising that circumstances may exist that cause the subject matter information to be materially misstated (Ref: Para. A76–A80)

38. The assurance practitioner shall exercise professional judgement in planning and performing an assurance engagement, including determining the nature, timing and extent of procedures. (Ref: Para. A81– A85)

39. The assurance practitioner shall apply assurance skills and techniques as part of an iterative, systematic engagement process.

40. The assurance practitioner shall plan the engagement so that it will be performed in an effective manner, including setting the scope, timing and direction of the engagement, and determining the nature, timing and extent of planned procedures that are required to be carried out in order to achieve the objective of the assurance practitioner. (Ref: Para. A86–A89)

41. The assurance practitioner shall determine whether the criteria are suitable for the engagement circumstances, including that they exhibit the characteristics identified in paragraph 24(b)(ii).

42. If it is discovered after the engagement has been accepted that one or more preconditions for an assurance engagement is not present, the assurance practitioner shall discuss the matter with the appropriate party(ies), and shall determine:

1. Whether the matter can be resolved to the assurance practitioner’s satisfaction;

2. Whether it is appropriate to continue with the engagement; and

3. Whether and, if so, how to communicate the matter in the assurance report.

43. If it is discovered after the engagement has been accepted that some or all of the applicable criteria are unsuitable or some or all of the underlying subject matter is not appropriate for an assurance engagement, the assurance practitioner shall consider withdrawing from the engagement, if withdrawal is possible under applicable law or regulation. If the assurance practitioner continues with the engagement, the assurance practitioner shall express a qualified or adverse conclusion, or disclaimer of conclusion, as appropriate in the circumstances. (Ref: Para. A90–A91)

44. The assurance practitioner shall consider materiality when: (Ref: Para. A92–A100)

1. Planning and performing the assurance engagement, including when determining the nature, timing and extent of procedures; and

2. Evaluating whether the subject matter information is free from material misstatement.

45. The assurance practitioner shall make enquiries of the appropriate party(ies) regarding:

1. Whether they have knowledge of any actual, suspected or alleged intentional misstatement or non-compliance with laws and regulations affecting the subject matter information; (Ref: Para. A101-A102)

2. Whether the responsible party has an internal audit function and, if so, make further enquiries to obtain an understanding of the activities and main findings of the internal audit function with respect to the subject matter information; and

3. Whether the responsible party has used any experts in the preparation of the subject matter information.

50. When designing and performing procedures, the assurance practitioner shall consider the relevance and reliability of the information to be used as evidence. If:

1. Evidence obtained from one source is inconsistent with that obtained from another; or

2. The assurance practitioner has doubts about the reliability of information to be used as evidence,

the assurance practitioner shall determine what changes or additions to procedures are necessary to resolve the matter, and shall consider the effect of the matter, if any, on other aspects of the engagement.

51. The assurance practitioner shall accumulate uncorrected misstatements identified during the engagement other than those that are clearly trivial. (Ref: Para. A119-A120)

52. When the work of an assurance practitioner’s expert is to be used, the assurance practitioner shall also: (Ref: Para. A121– A125)

1. Evaluate whether the assurance practitioner’s expert has the necessary competence, capabilities and objectivity for the assurance practitioner’s purposes. In the case of an assurance practitioner’s external expert, the evaluation of objectivity shall include enquiry regarding interests and relationships that may create a threat to that expert’s objectivity; (Ref: Para. A126–A129)

2. Obtain a sufficient understanding of the field of expertise of the assurance practitioner’s expert; (Ref: Para. A130–A131)

3. Agree with the assurance practitioner’s expert on the nature, scope and objectives of that expert’s work; and (Ref: Para. A132–A133)

4. Evaluate the adequacy of the assurance practitioner’s expert’s work for the assurance practitioner’s purposes. (Ref: Para. A134–A135)

53. When the work of another assurance practitioner is to be used, the assurance practitioner shall evaluate whether that work is adequate for the assurance practitioner’s purposes.

54. If information to be used as evidence has been prepared using the work of a responsible party’s or a measurer’s or evaluator’s expert, the assurance practitioner shall, to the extent necessary having regard to the significance of that expert’s work for the assurance practitioner’s purposes:

1. Evaluate the competence, capabilities and objectivity of that expert;

2. Obtain an understanding of the work of that expert; and

3. Evaluate the appropriateness of that expert’s work as evidence.

55. If the assurance practitioner plans to use the work of the internal audit function, the assurance practitioner shall evaluate the following:

1. The extent to which the internal audit function’s organisational status and relevant policies and procedures support the objectivity of the internal auditors;

2. The level of competence of the internal audit function;

3. Whether the internal audit function applies a systematic and disciplined approach, including quality control; and

4. Whether the work of the internal audit function is adequate for the purposes of the engagement.

56. The assurance practitioner shall request from the appropriate party(ies) a written representation:

1. That it has provided the assurance practitioner with all information of which the appropriate party(ies) is aware that is relevant to the engagement. (Ref: Para. A54–A55 and A137–A139)

2. Confirming the measurement or evaluation of the underlying subject matter against the applicable criteria, including that all relevant matters are reflected in the subject matter information.

57. If, in addition to required representations, the assurance practitioner determines that it is necessary to obtain one or more written representations to support other evidence relevant to the subject matter information, the assurance practitioner shall request such other written representations.

58. When written representations relate to matters that are material to the subject matter information, the assurance practitioner shall:

1. Evaluate their reasonableness and consistency with other evidence obtained, including other representations (oral or written); and

2. Consider whether those making the representations can be expected to be well informed on the particular matters.

59. The date of the written representations shall be as near as practicable to, but not after, the date of the assurance report.

60. If one or more of the requested written representations are not provided or the assurance practitioner concludes that there is sufficient doubt about the competence, integrity, ethical values, or diligence of those providing the written representations, or that the written representations are otherwise not reliable, the assurance practitioner shall: (Ref: Para. A140)

1. Discuss the matter with the appropriate party(ies);

2. Re-evaluate the integrity of those from whom the representations were requested or received and evaluate the effect that this may have on the reliability of representations (oral or written) and evidence in general; and

3. Take appropriate actions, including determining the possible effect on the conclusion in the assurance report.

61. When relevant to the engagement, the assurance practitioner shall consider the effect on the subject matter information and on the assurance report of events up to the date of the assurance report, and shall respond appropriately to facts that become known to the assurance practitioner after the date of the assurance report, that, had they been known to the assurance practitioner at that date, may have caused the assurance practitioner to amend the assurance report. The extent of consideration of subsequent events depends on the potential for such events to affect the subject matter information and to affect the appropriateness of the assurance practitioner’s conclusion. However, the assurance practitioner has no responsibility to perform any procedures regarding the subject matter information after the date of the assurance report. (Ref: Para. A141–A142)

62. When documents containing the subject matter information and the assurance report thereon include other information, the assurance practitioner shall read that other information to identify material inconsistencies, if any, with the subject matter information or the assurance report and, if on reading that other information, the assurance practitioner: (Ref: Para. A143)

1. Identifies a material inconsistency between that other information and the subject matter information or the assurance report; or

2. Becomes aware of a material misstatement of fact in that other information that is unrelated to matters appearing in the subject matter information or the assurance report,

the assurance practitioner shall discuss the matter with the appropriate party(ies) and take further action as appropriate.

63. The assurance practitioner shall evaluate whether the subject matter information adequately refers to or describes the applicable criteria. (Ref: Para. A144–A146)

64. The assurance practitioner shall evaluate the sufficiency and appropriateness of the evidence obtained in the context of the engagement and, if necessary in the circumstances, attempt to obtain further evidence. The assurance practitioner shall consider all relevant evidence, regardless of whether it appears to corroborate or to contradict the measurement or evaluation of the underlying subject matter against the applicable criteria. If the assurance practitioner is unable to obtain necessary further evidence, the assurance practitioner shall consider the implications for the assurance practitioner’s conclusion in paragraph 65. (Ref: Para. A147- A153)

65. The assurance practitioner shall form a conclusion about whether the subject matter information is free from material misstatement. In forming that conclusion, the assurance practitioner shall consider the assurance practitioner’s conclusion in paragraph 64 regarding the sufficiency and appropriateness of evidence obtained and an evaluation of whether uncorrected misstatements are material, individually or in the aggregate. (Ref: Para. A3 and A154–A155)

66. If the assurance practitioner is unable to obtain sufficient appropriate evidence, a scope limitation exists and the assurance practitioner shall express a qualified conclusion, disclaim a conclusion, or withdraw from the engagement, where withdrawal is possible under applicable law or regulation, as appropriate. (Ref: Para. A156–A158)

67. The assurance report shall be in writing and shall contain a clear expression of the assurance practitioner’s conclusion about the subject matter information. (Ref: Para. A2, A159–A161)

68. The assurance practitioner’s conclusion shall be clearly separated from information or explanations that are not intended to affect the assurance practitioner’s conclusion, including any Emphasis of Matter, Other Matter, findings related to particular aspects of the engagements, recommendations or additional information included in the assurance report. The wording used shall make it clear that an Emphasis of Matter, Other Matter, findings, recommendations or additional information is not intended to detract from the assurance practitioner’s conclusion. (Ref: Para. A159–A161)

69. The assurance report shall include, at a minimum, the following basic elements:

1. A title that clearly indicates the report is an independent assurance report. (Ref: Para. A162)

2. An addressee. (Ref: Para. A163)

3. An identification or description of the level of assurance obtained by the assurance practitioner, the subject matter information and, when appropriate, the underlying subject matter. When the assurance practitioner’s conclusion is phrased in terms of a statement made by the appropriate party, that statement shall accompany the assurance report, be reproduced in the assurance report or be referenced therein to a source that is available to the intended users. (Ref: Para. A164)

4. Identification of the applicable criteria. (Ref: Para. A165)

5. Where appropriate, a description of any significant inherent limitations associated with the measurement or evaluation of the underlying subject matter against the applicable criteria. (Ref: Para. A166)

6. When the applicable criteria are designed for a specific purpose, a statement alerting readers to this fact and that, as a result, the subject matter information may not be suitable for another purpose. (Ref: Para. A167–A168)

7. A statement to identify the responsible party and the measurer or evaluator if different, and to describe their responsibilities and the assurance practitioner’s responsibilities. (Ref: Para. A169)

8. A statement that the engagement was performed in accordance with this ISAE (NZ) or, where there is a subject matter specific ISAE (NZ) or SAE, that ISAE (NZ) or SAE. (Ref: Para. A170 – A171)

9. A statement that the firm of which the assurance practitioner is a member applies Professional and Ethical Standard 3, or other professional requirements, or requirements in law or regulation, that are at least as demanding as Professional and Ethical Standard 3. If the assurance practitioner is not a professional accountant, the statement shall identify the professional requirements, or requirements in law or regulation, applied that are at least as demanding as Professional and Ethical Standard 3. (Ref: Para. A172)

10. A statement that the assurance practitioner complies with the independence and other ethical requirements of Professional and Ethical Standard 1, or other professional requirements, or requirements imposed by law or regulation, that are at least as demanding as the provisions of Professional and Ethical Standard 1 related to assurance engagements. If the assurance practitioner is not a member of a professional accounting body in public practice, the statement shall identify the professional requirements, or requirements imposed by law or regulation, applied that are at least as demanding as the provisions of Professional and Ethical Standard 1 related to assurance engagements. (Ref: Para. A173)

11. An informative summary of the work performed as the basis for the assurance practitioner’s conclusion. In the case of a limited assurance engagement, an appreciation of the nature, timing and extent of procedures performed is essential to understanding the assurance practitioner’s conclusion. In a limited assurance engagement, the summary of the work performed shall state that:

    1. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement; and

    2. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed. (Ref: Para. A6, A174–A178)

12. The assurance practitioner’s conclusion: (Ref: Para. A2, A179-A181)

    1. When appropriate, the conclusion shall inform the intended users of the context in which the assurance practitioner’s conclusion is to be read. (Ref: Para. A180)

    2. In a reasonable assurance engagement, the conclusion shall be expressed in a positive form. (Ref: Para. A179)

    3. In a limited assurance engagement, the conclusion shall be expressed in a form that conveys whether, based on the procedures performed and evidence obtained, a matter(s) has come to the assurance practitioner’s attention to cause the assurance practitioner to believe that the subject matter information is materially misstated. (Ref: Para. A181)

    4. The conclusion in (ii) or (iii) shall be phrased using appropriate words for the underlying subject matter and applicable criteria given the engagement circumstances and shall be phrased in terms of: (Ref: Para. A182)

       1. The underlying subject matter and the applicable criteria;

       2. The subject matter information, and the applicable criteria; or

       3. A statement made by the appropriate party.

    5. When the assurance practitioner expresses a modified conclusion, the assurance report shall contain:

       1. A section that provides a description of the matter(s) giving rise to the modification; and

       2. A section that contains the assurance practitioner’s modified conclusion. (Ref: Para. A183)

13. The assurance practitioner’s signature. (Ref: Para. A184)

14. The date of the assurance report. The assurance report shall be dated no earlier than the date on which:

    1. The assurance practitioner has obtained the evidence on which the assurance practitioner’s conclusion is based, including evidence that those with the recognised authority have asserted that they have taken responsibility for the subject matter information; and

    2. When an engagement quality review is required in accordance with Professional and Ethical Standard 3 or the firm’s policies or procedures, the engagement quality review is complete . (Ref: Para. A185)

15. The location in the jurisdiction where the assurance practitioner practices.

NZ69.1 The assurance practitioner’s report for the assurance engagement shall include a statement as to the existence of any relationship (other than that of assurance practitioner) which the assurance practitioner has with, or any interests which the assurance practitioner has in, the entity or any of its subsidiaries. NZ Appendix 2 provides an example of wording that may be used in the assurance practitioner’s report to identify any relationships with, or interests in, the entity.

70. If the assurance practitioner refers to the work of an assurance practitioner’s expert in the assurance report, the wording of that report shall not imply that the assurance practitioner’s responsibility for the conclusion expressed in that report is reduced because of the involvement of that expert. (Ref: Para. A186–A188)

71. If the assurance practitioner is required by law or regulation to use a specific layout or wording of the assurance report, the assurance report shall refer to this or other ISAEs (NZ) or SAE only if the assurance report includes, at a minimum, each of the elements identified in paragraph 69.

72. The assurance practitioner shall express an unmodified conclusion when the assurance practitioner concludes:

1. In the case of a reasonable assurance engagement, that the subject matter information is prepared, in all material respects, in accordance with the applicable criteria; or

2. In the case of a limited assurance engagement, that, based on the procedures performed and evidence obtained, no matter(s) has come to the attention of the assurance practitioner that causes the assurance practitioner to believe that the subject matter information is not prepared, in all material respects, in accordance with the applicable criteria.

73. If the assurance practitioner considers it necessary to:

1. Draw intended users’ attention to a matter presented or disclosed in the subject matter information that, in the assurance practitioner’s judgement, is of such importance that it is fundamental to intended users’ understanding of the subject matter information (an Emphasis of Matter paragraph); or

2. Communicate a matter other than those that are presented or disclosed in the subject matter information that, in the assurance practitioner’s judgement, is relevant to intended users’ understanding of the engagement, the assurance practitioner’s responsibilities or the assurance report (an Other Matter paragraph),

and this is not prohibited by law or regulation, the assurance practitioner shall do so in a paragraph in the assurance report, with an appropriate heading, that clearly indicates the assurance practitioner’s conclusion is not modified in respect of the matter. In the case of an Emphasis of Matter paragraph, such a paragraph shall refer only to information presented or disclosed in the subject matter information.

74. The assurance practitioner shall express a modified conclusion in the following circumstances:

1. When, in the assurance practitioner’s professional judgement, a scope limitation exists and the effect of the matter could be material (see paragraph 66). In such cases, the assurance practitioner shall express a qualified conclusion or a disclaimer of conclusion.

2. When, in the assurance practitioner’s professional judgement, the subject matter information is materially misstated. In such cases, the assurance practitioner shall express a qualified conclusion or adverse conclusion. (Ref: Para.A191)

75. The assurance practitioner shall express a qualified conclusion when, in the assurance practitioner’s professional judgement, the effects, or possible effects, of a matter are not so material and pervasive as to require an adverse conclusion or a disclaimer of conclusion. A qualified conclusion shall be expressed as being “except for” the effects, or possible effects, of the matter to which the qualification relates. (Ref: Para. A189–A190)

76. If the assurance practitioner expresses a modified conclusion because of a scope limitation but is also aware of a matter(s) that causes the subject matter information to be materially misstated, the assurance practitioner shall include in the assurance report a clear description of both the scope limitation and the matter(s) that causes that the subject matter information to be materially misstated.

77. When the statement made by the appropriate party has identified and properly described that the subject matter information is materially misstated, the assurance practitioner shall either:

1. Express a qualified conclusion or adverse conclusion phrased in terms of the underlying subject matter and the applicable criteria; or

2. If specifically required by the terms of the engagement to phrase the conclusion in terms of a statement made by the appropriate party, express an unqualified conclusion but include an Emphasis of Matter paragraph in the assurance report referring to the statement made by the appropriate party that identifies and properly describes that the subject matter information is materially misstated. (Ref: Para. A192)

78. The assurance practitioner shall consider whether, pursuant to the terms of the engagement and other engagement circumstances, any matter has come to the attention of the assurance practitioner that is to be communicated with the responsible party, the measurer or evaluator, the engaging party, those charged with governance or others. (Ref: Para. A193-A199)

79. The assurance practitioner shall prepare on a timely basis engagement documentation that provides a record of the basis for the assurance report that is sufficient and appropriate to enable an experienced practitioner, having no previous connection with the engagement, to understand: (Ref: Para. A200– A204)

1. The nature, timing and extent of the procedures performed to comply with relevant ISAEs (NZ) and applicable legal and regulatory requirements;

2. The results of the procedures performed, and the evidence obtained; and

3. Significant matters arising during the engagement, the conclusions reached thereon, and significant professional judgements made in reaching those conclusions.

80. If the assurance practitioner identifies information that is inconsistent with the assurance practitioner’s final conclusion regarding a significant matter, the assurance practitioner shall document how the assurance practitioner addressed the inconsistency.

81. The assurance practitioner shall assemble the engagement documentation in an engagement file and complete the administrative process of assembling the final engagement file on a timely basis after the date of the assurance report. (Ref: Para. A205–A206)

82. After the assembly of the final engagement file has been completed, the assurance practitioner shall not delete or discard engagement documentation of any nature before the end of its retention period. (Ref: Para. A207)

83. If the assurance practitioner finds it necessary to amend existing engagement documentation or add new engagement documentation after the assembly of the final engagement file has been completed the assurance practitioner shall, regardless of the nature of the amendments or additions, document:

1. The specific reasons for making the amendments or additions; and

2. When, and by whom, they were made and reviewed.

A1. In a consulting engagement, the assurance practitioner applies technical skills, education, observations, experiences, and knowledge. Consulting engagements involve an analytical process that typically involves some combination of activities relating to: objective-setting, fact-finding, definition of problems or opportunities, evaluation of alternatives, development of recommendations including actions, communication of results, and sometimes implementation and follow-up. Reports (if issued) are generally written in a narrative (or “long-form”) style. Generally the work performed is only for the use and benefit of the client. The nature and scope of work is determined by agreement between the assurance practitioner and the client. Any service that meets the definition of an assurance engagement is not a consulting engagement but an assurance engagement.

A2. Where the subject matter information is made up of a number of aspects, separate conclusions may be provided on each aspect. All such separate conclusions do not need to relate to the same level of assurance. Rather, each conclusion is expressed in the form that is appropriate to either a reasonable assurance engagement or a limited assurance engagement. References in this ISAE (NZ) to the conclusion in the assurance report include each conclusion when separate conclusions are provided.

A3. Because the level of assurance obtained in a limited assurance engagement is lower than in a reasonable assurance engagement, the procedures the assurance practitioner performs in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. The primary differences between the procedures for a reasonable assurance engagement and a limited assurance engagement include:

1. The emphasis placed on the nature of various procedures as a source of evidence will likely differ, depending on the engagement circumstances. For example, the assurance practitioner may judge it to be appropriate in the circumstances of a particular limited assurance engagement to place relatively greater emphasis on enquiries of the entity’s personnel and analytical procedures, and relatively less emphasis, if any, on testing of controls and obtaining evidence from external sources than may be the case for a reasonable assurance engagement.

2. In a limited assurance engagement the assurance practitioner may:

   • Select less items for examination; or

   • Perform fewer procedures (for example, performing only analytical procedures in circumstances when, in a reasonable assurance engagement, both analytical procedures and other procedures would be performed).

3. In a reasonable assurance engagement, analytical procedures performed in response to the engagement risk involve developing expectations that are sufficiently precise to identify material misstatements. In a limited assurance engagement, analytical procedures may be designed to support expectations regarding the direction of trends, relationships and ratios rather than to identify misstatements with the level of precision expected in a reasonable assurance engagement.

4. Further, when significant fluctuations, relationships or differences are identified, appropriate evidence in a limited assurance engagement may be obtained by making enquiries and considering responses received in the light of known engagement circumstances.

5. In addition, when undertaking analytical procedures in a limited assurance engagement the assurance practitioner may, for example use data that is more highly aggregated, such as quarterly data rather than monthly data, or use data that has not been subjected to separate procedures to test its reliability to the same extent as it would be for a reasonable assurance engagement.

A4. The level of assurance the assurance practitioner plans to obtain is not ordinarily susceptible to quantification, and whether it is meaningful is a matter of professional judgement for the assurance practitioner to determine in the circumstances of the engagement. In a limited assurance engagement, the assurance practitioner performs procedures that are limited compared with those necessary in a reasonable assurance engagement but are, nonetheless, planned to obtain a level of assurance that is meaningful. To be meaningful the level of assurance obtained by the assurance practitioner is likely to enhance the intended users’ confidence about the subject matter information to a degree that is clearly more than inconsequential. (see also paragraphs A16–A18).

A5. Across the range of all limited assurance engagements, what is meaningful assurance can vary from just above assurance that is likely to enhance the intended users’ confidence about the subject matter information to a degree that is clearly more than inconsequential to just below reasonable assurance. What is meaningful in a particular engagement represents a judgement within that range that depends on the engagement circumstances, including the information needs of intended users as a group, the criteria, and the underlying subject matter of the engagement.

A6. Because the level of assurance obtained by the assurance practitioner in limited assurance engagements varies, the assurance practitioner’s report contains an informative summary of the procedures performed, recognising that an appreciation of the nature, timing and extent of procedures performed is essential to understanding the assurance practitioner’s conclusion (see paragraphs 69(k) and A174–A178).

A7. Some of the factors that may be relevant in determining what constitutes meaningful assurance in a specific engagement include, for example:

A8. Examples of engagements that may be conducted under this ISAE (NZ) include:

1. Sustainability - An engagement on sustainability involves obtaining assurance on a report prepared by management or management’s expert (the measurer or evaluator) on the sustainability performance of the entity.

2. Compliance with law or regulation – An engagement on compliance with law or regulation involves obtaining assurance on a statement by another party (the measurer or evaluator) of compliance with the relevant law or regulation.

3. Value for money - An engagement on value for money involves obtaining assurance on a measurement or evaluation of value for money by another party (the measurer or evaluator).

A9. Assurance skills and techniques include:

A10. Suitable criteria are required for reasonably consistent measurement or evaluation of an underlying subject matter within the context of professional judgement. Without the frame of reference provided by suitable criteria, any conclusion is open to individual interpretation and misunderstanding. The suitability of criteria is context-sensitive, that is, it is determined in the context of the engagement circumstances. Even for the same underlying subject matter there can be different criteria, which will yield a different measurement or evaluation. For example, a measurer or evaluator might select, as one of the criteria for the underlying subject matter of customer satisfaction, the number of customer complaints resolved to the acknowledged satisfaction of the customer; another measurer or evaluator might select the number of repeat purchases in the three months following the initial purchase. The suitability of criteria is not affected by the level of assurance, that is, if criteria are unsuitable for a reasonable assurance engagement, they are also unsuitable for a limited assurance engagement, and vice versa. Suitable criteria include, when relevant, criteria for presentation and disclosure.

A11. Engagement risk does not refer to, or include, the assurance practitioner’s business risks, such as loss from litigation, adverse publicity, or other events arising in connection with particular subject matter information.

A12. In general, engagement risk can be represented by the following components, although not all of these components will necessarily be present or significant for all assurance engagements:

1. Risks that the assurance practitioner does not directly influence, which in turn consist of:

   1. The susceptibility of the subject matter information to a material misstatement before consideration of any related controls applied by the appropriate party(ies) (inherent risk); and

   2. The risk that a material misstatement that occurs in the subject matter information will not be prevented, or detected and corrected, on a timely basis by the appropriate party(ies)’s internal control (control risk); and

2. The risk that the assurance practitioner does directly influence, which is the risk that the procedures performed by the assurance practitioner will not detect a material misstatement (detection risk).

A13. The degree to which each of these components is relevant to the engagement is affected by the engagement circumstances, in particular:

A14. Reducing engagement risk to zero is very rarely attainable or cost beneficial and, therefore, “reasonable assurance” is less than absolute assurance, as a result of factors such as the following:

A15. The engaging party may be, under different circumstances, management or those charged with governance of the responsible party, a legislature, the intended users, the measurer or evaluator, or a different third party.

A16. In some cases, there may be intended users other than those to whom the assurance report is addressed. The assurance practitioner may not be able to identify all those who will read the assurance report, particularly where a large number of people have access to it. In such cases, particularly where possible users are likely to have a broad range of interests in the underlying subject matter, intended users may be limited to major stakeholders with significant and common interests. Intended users may be identified in different ways, for example, by agreement between the assurance practitioner and the responsible party or engaging party, or by law or regulation.

A17. Intended users or their representatives may be directly involved with the assurance practitioner and the responsible party (and the engaging party if different) in determining the requirements of the engagement. Regardless of the involvement of others however, and unlike an agreed- upon procedures engagement (which involves reporting factual findings based upon procedures agreed with the engaging party and any appropriate third parties, rather than a conclusion):

1. The assurance practitioner is responsible for determining the nature, timing and extent of procedures; and

2. The assurance practitioner may need to perform additional procedures if information comes to the assurance practitioner’s attention that differs significantly from that on which the determination of planned procedures was based (see paragraphs A116– A118).

A18. In some cases, intended users (for example, bankers and regulators) impose a requirement on, or request the appropriate party(ies) to arrange for an assurance engagement to be performed for a specific purpose. When engagements use criteria that are designed for a specific purpose, paragraph 69(f) requires a statement alerting readers to this fact. In addition, the assurance practitioner may consider it appropriate to indicate that the assurance report is intended solely for specific users. Depending on the engagement circumstances, this may be achieved by restricting the distribution or use of the assurance report (see paragraphs A167–A168).

A19. In some cases, the subject matter information may be a statement that evaluates an aspect of a process, or of performance or compliance, in relation to the criteria. For example, “ABC’s internal control operated effectively in terms of XYZ criteria during the period ….” or “ABC’s governance structure conformed with XYZ criteria during the period …”.

A20. The roles played by the responsible party, the measurer or evaluator, and the engaging party can vary (see paragraph A37). Also, management and governance structures vary by jurisdiction and by entity, reflecting influences such as different cultural and legal backgrounds, and size and ownership characteristics. Such diversity means that it is not possible for ISAEs (NZ) and SAEs to specify for all engagements the person(s) with whom the assurance practitioner is to enquire of, request representations from, or otherwise communicate with in all circumstances. In some cases, for example, when the appropriate party(ies) is only part of a complete legal entity, identifying the appropriate management personnel or those charged with governance with whom to communicate will require the exercise of professional judgement to determine which person(s) have the appropriate responsibilities for, and knowledge of, the matters concerned.

A21. This ISAE (NZ) includes requirements that apply to assurance engagements⁵ (other than audits or reviews of historical financial information), including engagements in accordance with a subject matter-specific ISAE (NZ) or SAE. In some cases, a subject matter-specific ISAE (NZ) or SAE is also relevant to the engagement. A subject matter-specific ISAE (NZ) or SAE is relevant to the engagement when the ISAE (NZ) or SAE is in effect, the subject matter of the ISAE (NZ) or SAE is relevant to the engagement, and the circumstances addressed by the ISAE (NZ) or SAE exist.

A22. The ISAs (NZ), ISRE (NZ) and NZ SRE have been written for audits and reviews of historical financial information, respectively, and do not apply to such other assurance engagements. They may, however, provide guidance in relation to the engagement process generally for assurance practitioners undertaking an assurance engagement in accordance with this ISAE (NZ).

A23. ISAEs (NZ) and SAEs contain the objectives of the assurance practitioner in following the ISAEs (NZ) or SAE, and requirements designed to enable the assurance practitioner to meet those objectives. In addition, they contain related guidance in the form of application and other explanatory material, introductory material that provides context relevant to a proper understanding of the ISAE (NZ) or SAE, and definitions.

A24. The objectives in an ISAE (NZ) or SAE provide the context in which the requirements of the ISAE (NZ) or SAE are set, and are intended to assist in:

1. Understanding what is to be accomplished; and

2. Deciding whether more needs to be done to achieve the objectives.

The proper application of the requirements of an ISAE (NZ) or SAE by the assurance practitioner is expected to provide a sufficient basis for the assurance practitioner’s achievement of the objectives. However, because the circumstances of assurance engagements vary widely and all such circumstances cannot be anticipated in the ISAEs (NZ) or SAEs, the assurance practitioner is responsible for determining the procedures necessary to fulfil the requirements of relevant ISAEs (NZ) or SAEs and to achieve the objectives stated therein. In the circumstances of an engagement, there may be particular matters that require the assurance practitioner to perform procedures in addition to those required by relevant ISAEs (NZ) or SAEs to meet the objectives specified in those ISAEs (NZ) or SAEs.

A25. The requirements of ISAEs (NZ) or SAEs are expressed using “shall.”

A26. Where necessary, the application and other explanatory material provides further explanation of the requirements and guidance for carrying them out. In particular, it may:

1. Explain more precisely what a requirement means or is intended to cover; and

2. Include examples that may be appropriate in the circumstances.

While such guidance does not in itself impose a requirement, it is relevant to the proper application of the requirements. The application and other explanatory material may also provide background information on matters addressed in an ISAE (NZ) or SAE. Where appropriate, additional considerations specific to public sector audit organisations or smaller firms are included within the application and other explanatory material. These additional considerations assist in the application of the requirements in the ISAEs (NZ) or SAEs. They do not, however, limit or reduce the responsibility of the assurance practitioner to apply and comply with the requirements in an ISAE (NZ) or SAE.

A27. Definitions are provided in the ISAEs (NZ) and SAEs to assist in the consistent application and interpretation of the ISAEs (NZ) and SAE, and are not intended to override definitions that may be established for other purposes, whether by laws, regulations or otherwise.

A28. Appendices form part of the application and other explanatory material. The purpose and intended use of an appendix are explained in the body of the related ISAE (NZ) or SAE or within the title and introduction of the appendix itself.

A29. Although some procedures are required only for reasonable assurance engagements, they may nonetheless be appropriate in some limited assurance engagements.

A30. Professional and Ethical Standard 1 establishes the following fundamental principles of ethics, which are:

1. Integrity;

2. Objectivity;

3. Professional competence and due care;

4. Confidentiality; and

5. Professional behaviour.

The fundamental principles of ethics establish the standard of behaviour expected of an assurance practitioner.

A31. Professional and Ethical Standard 1 provides a conceptual framework which the assurance practitioner is required to apply when addressing threats to compliance with the fundamental principles, including:

1. Identify threats to compliance with the fundamental principles. Threats fall into one or more of the following categories:

   1. Self-interest;

   2. Self-review;

   3. Advocacy;

   4. Familiarity; and

   5. Intimidation;

2. Evaluating whether the threats identified are at an acceptable level; and

3. If the identified threats to compliance with the fundamental principles are not at an acceptable level, addressing them by eliminating the circumstances that create the threats, applying safeguards to reduce threats to an acceptable level, or withdrawing from the engagement, where withdrawal is possible under applicable law or regulation.

A32. Professional and Ethical Standard 1 sets out requirements and application material on various topics, including:

A33. Professional and Ethical Standard 1 also includes the International Independence Standards (New Zealand). Professional and Ethical Standard 1 defines independence as comprising both independence of mind and independence in appearance. Independence safeguards the ability to form an assurance conclusion without being affected by influences that might compromise that conclusion. Independence enhances the ability to act with integrity, to be objective and to maintain an attitude of professional scepticism. Matters addressed in Professional and Ethical Standard 1 with respect to independence include, for example:

A34. Professional requirements, or requirements imposed by law or regulation, are at least as demanding as the provisions of Professional and Ethical Standard 1 related to assurance engagements when they address all the matters referred to in paragraphs A30–A33 and impose obligations that achieve the aims of the requirements set out in Professional and Ethical Standard 1 related to such engagements.

A35. In a public sector environment, some of the preconditions for an assurance engagement may be assumed to be present, for example:

1. The roles and responsibilities of public sector audit organisations and the government entities scoped into assurance engagements are assumed to be appropriate because they are generally set out in legislation;

2. Public sector audit organisations’ right of access to the information necessary to perform the engagement is often set out in legislation;

3. The assurance practitioner’s conclusion, in the form appropriate to either a reasonable assurance engagement or a limited assurance engagement, is generally required by legislation to be contained in a written report; and

4. A rational purpose is generally present because the engagement is set out in legislation.

A36. If suitable criteria are not available for all of the underlying subject matter but the assurance practitioner can identify one or more aspects of the underlying subject matter for which those criteria are suitable, then an assurance engagement can be performed with respect to that aspect of the underlying subject matter in its own right. In such cases, the assurance report may need to clarify that the report does not relate to the original underlying subject matter in its entirety.

A37. All assurance engagements have at least three parties: the responsible party, the assurance practitioner, and the intended users. In many attestation engagements the responsible party may also be the measurer or evaluator, and the engaging party. See the Appendix for a discussion of how each of these roles relate to an assurance engagement.

A38. Evidence that the appropriate relationship exists with respect to responsibility for the underlying subject matter may be obtained through an acknowledgement provided by the responsible party. Such an acknowledgement also establishes a basis for a common understanding of the responsibilities of the responsible party and the assurance practitioner. A written acknowledgement is the most appropriate form of documenting the responsible party’s understanding. In the absence of a written acknowledgement of responsibility, it may still be appropriate for the assurance practitioner to accept the engagement if, for example, other sources, such as legislation or a contract, indicate responsibility. In other cases, it may be appropriate to decline the engagement depending on the circumstances, or to disclose the circumstances in the assurance report.

A39. The measurer or evaluator is responsible for having a reasonable basis for the subject matter information. What constitutes a reasonable basis will depend on the nature of the underlying subject matter and other engagement circumstances. In some cases, a formal process with extensive internal controls may be needed to provide the measurer or evaluator with a reasonable basis that the subject matter information is free from material misstatement. The fact that the assurance practitioner will report on the subject matter information is not a substitute for the measurer or evaluator’s own processes to have a reasonable basis for the subject matter information.

A40. An appropriate underlying subject matter is identifiable and capable of consistent measurement or evaluation against the applicable criteria such that the resulting subject matter information can be subjected to procedures for obtaining sufficient appropriate evidence to support a reasonable assurance or limited assurance conclusion, as appropriate.

A41. The appropriateness of an underlying subject matter is not affected by the level of assurance, that is, if an underlying subject matter is not appropriate for a reasonable assurance engagement, it is also not appropriate for a limited assurance engagement, and vice versa.

A42. Different underlying subject matters have different characteristics, including the degree to which information about them is qualitative versus quantitative, objective versus subjective, historical versus prospective, and relates to a point in time or covers a period. Such characteristics affect the:

1. Precision with which the underlying subject matter can be measured or evaluated against criteria; and

2. The persuasiveness of available evidence.

A43. Identifying such characteristics and considering their effects assist the assurance practitioner when assessing the appropriateness of the underlying subject matter and also in determining the content of the assurance report (see paragraph A164).

A44. In some cases, the assurance engagement may relate to only one part of a broader underlying subject matter. For example, the assurance practitioner may be engaged to report on one aspect of an entity’s contribution to sustainable development, such as a number of programs run by an entity that have positive environmental outcomes. In determining whether the engagement exhibits the characteristic of having an appropriate underlying subject matter in such cases, it may be appropriate for the assurance practitioner to consider whether information about the aspect on which the assurance practitioner is asked to report is likely to meet the information needs of intended users as a group, and also how the subject matter information will be presented and distributed, for example, whether there are more significant programs with less favourable outcomes that the entity is not reporting upon.

A45. Suitable criteria exhibit the following characteristics:

1. Relevance: Relevant criteria result in subject matter information that assists decision- making by the intended users.

2. Completeness: Criteria are complete when subject matter information prepared in accordance with them does not omit relevant factors that could reasonably be expected to affect decisions of the intended users made on the basis of that subject matter information. Complete criteria include, where relevant, benchmarks for presentation and disclosure.

3. Reliability: Reliable criteria allow reasonably consistent measurement or evaluation of the underlying subject matter including, where relevant, presentation and disclosure, when used in similar circumstances by different assurance practitioners.

4. Neutrality: Neutral criteria result in subject matter information that is free from bias as appropriate in the engagement circumstances.

5. Understandability: Understandable criteria result in subject matter information that can be understood by the intended users.

A46. Vague descriptions of expectations or judgements of an individual’s experiences do not constitute suitable criteria.

A47. The suitability of criteria for a particular engagement depends on whether they reflect the above characteristics. The relative importance of each characteristic to a particular engagement is a matter of professional judgement. Further, criteria may be suitable for a particular set of engagement circumstances, but may not be suitable for a different set of engagement circumstances. For example, reporting to governments or regulators may require the use of a particular set of criteria, but these criteria may not be suitable for a broader group of users.

A48. Criteria can be selected or developed in a variety of ways, for example, they may be:

• Embodied in law or regulation.

• Issued by authorised or recognised bodies of experts that follow a transparent due process.

• Developed collectively by a group that does not follow a transparent due process.

• Published in scholarly journals or books.

• Developed for sale on a proprietary basis.

• Specifically designed for the purpose of preparing the subject matter information in the particular circumstances of the engagement.

How criteria are developed may affect the work that the assurance practitioner carries out to assess their suitability.

A49. In some cases, law or regulation prescribes the criteria to be used for the engagement. In the absence of indications to the contrary, such criteria are presumed to be suitable, as are criteria issued by authorised or recognised bodies of experts that follow a transparent due process if they are relevant to the intended users’ information needs. Such criteria are known as established criteria. Even when established criteria exist for an underlying subject matter, specific users may agree to other criteria for their specific purposes. For example, various frameworks can be used as established criteria for evaluating the effectiveness of internal control. Specific users may, however, develop a more detailed set of criteria that meet their specific information needs in relation to, for example, prudential supervision. In such cases, the assurance report:

1. Alerts readers that the subject matter information is prepared in accordance with special purpose criteria and that, as a result, the subject matter information may not be suitable for another purpose (see paragraph 69(f)); and

2. May note, when it is relevant to the circumstances of the engagement, that the criteria are not embodied in law or regulation, or issued by authorised or recognised bodies of experts that follow a transparent due process.

A50. If criteria are specifically designed for the purpose of preparing the subject matter information in the particular circumstances of the engagement, they are not suitable if they result in subject matter information or an assurance report that is misleading to the intended users. It is desirable for the intended users or the engaging party to acknowledge that specifically developed criteria are suitable for the intended users’ purposes. The absence of such an acknowledgement may affect what is to be done to assess the suitability of the criteria, and the information provided about the criteria in the assurance report.

A51. Criteria need to be available to the intended users to allow them to understand how the underlying subject matter has been measured or evaluated. Criteria are made available to the intended users in one or more of the following ways:

1. Publicly.

2. Through inclusion in a clear manner in the presentation of the subject matter information.

3. Through inclusion in a clear manner in the assurance report (see paragraph A165).

4. By general understanding, for example the criterion for measuring time in hours and minutes.

A52. Criteria may also be available only to intended users, for example the terms of a contract, or criteria issued by an industry association that are available only to those in the industry because they are relevant only to a specific purpose. When this is the case, paragraph 69(f) requires a statement alerting readers to this fact. In addition, the assurance practitioner may consider it appropriate to indicate that the assurance report is intended solely for specific users (see paragraph A167–A168).

A53. The quantity or quality of available evidence is affected by:

1. The characteristics of the underlying subject matter or the subject matter information. For example, less objective evidence might be expected when the subject matter information is future oriented rather than historical; and

2. Other circumstances, such as when evidence that could reasonably be expected to exist is not available because of, for example, the timing of the assurance practitioner’s appointment, an entity’s document retention policy, inadequate information systems, or a restriction imposed by the responsible party.

Ordinarily, evidence will be persuasive rather than conclusive.

A54. Seeking the agreement of the appropriate party(ies) that it acknowledges and understands its responsibility to provide the assurance practitioner with the following may assist the assurance practitioner in determining whether the engagement exhibits the characteristic of access to evidence:

1. Access to all information of which the appropriate party(ies) is aware that is relevant to the preparation of the subject matter information such as records, documentation and other matters;

2. Additional information that the assurance practitioner may request from the appropriate party(ies) for the purpose of the engagement; and

3. Unrestricted access to persons from the appropriate party(ies) from whom the assurance practitioner determines it necessary to obtain evidence.

A55. The nature of relationships between the responsible party, the measurer or evaluator, and the engaging party may affect the assurance practitioner’s ability to access records, documentation and other information the assurance practitioner may require as evidence to complete the engagement. The nature of such relationships may therefore be a relevant consideration when determining whether or not to accept the engagement. Examples of some circumstances in which the nature of these relationships may be problematic are included in paragraph A140.

A56. In determining whether the engagement has a rational purpose, relevant considerations may include the following:

A57. It is in the interests of both the engaging party and the assurance practitioner that the assurance practitioner communicates in writing the agreed terms of the engagement before the commencement of the engagement to help avoid misunderstandings. The form and content of the written agreement or contract will vary with the engagement circumstances. For example, if law or regulation prescribes in sufficient detail the terms of the engagement, the assurance practitioner need not record them in a written agreement, except for the fact that such law or regulation applies and that the appropriate party acknowledges and understands its responsibilities under such law or regulation.

A58. Law or regulation, particularly in the public sector, may mandate the appointment of an assurance practitioner and set out specific powers, such as the power to access an appropriate party(ies)’s records and other information, and responsibilities, such as requiring the assurance practitioner to report directly to a minister, the legislature or the public if an appropriate party(ies) attempts to limit the scope of the engagement.

A59. A change in circumstances that affects the intended users’ requirements, or a misunderstanding concerning the nature of the engagement, may justify a request for a change in the engagement, for example, from an assurance engagement to a non-assurance engagement, or from a reasonable assurance engagement to a limited assurance engagement. An inability to obtain sufficient appropriate evidence to form a reasonable assurance conclusion is not an acceptable reason to change from a reasonable assurance engagement to a limited assurance engagement.

A60. This ISAE (NZ) has been written in the context of a range of measures taken to ensure the quality of assurance engagements undertaken by assurance practitioners in public practice. Such measures include:

A61. Professional and Ethical Standard 3 deals with the firm’s responsibilities to design, implement and operate a system of quality management for assurance engagements.⁶ It sets out the responsibilities of the firm for establishing quality objectives that address the fulfilment of responsibilities in accordance with relevant ethical requirements, including those related to independence. Professional and Ethical Standard 3 also deals with the firm’s responsibility to establish policies or procedures addressing engagements that are required to be subject to engagement quality reviews.⁷ Professional and Ethical Standard 4 deals with the appointment and eligibility of the engagement quality reviewer, and the performance and documentation of the engagement quality review.⁸

A system of quality management addresses the following eight components: ⁹

1. The firm’s risk assessment process;

2. Governance and leadership;

3. Relevant ethical requirements;

4. Acceptance and continuance of client relationships and specific engagements;

5. Engagement performance;

6. Resources;

7. Information and communication; and

8. The monitoring and remediation process.

Firms or national requirements may use different terminology or frameworks to describe the components of the system of quality management.

A62. Other professional requirements, or requirements in law or regulation that deal with the firm’s responsibilities to design, implement and operate a system of quality management, are at least as demanding as Professional and Ethical Standard 3 when they address the requirements of Professional and Ethical Standard 3 and impose obligations on the firm that achieve the objective of Professional and Ethical Standard 3.

A63. The actions of the lead assurance practitioner, and appropriate messages to the other members of the engagement team, in the context of the lead assurance practitioner taking overall responsibility for managing and achieving quality on each engagement and being sufficiently and appropriately involved throughout the engagement, emphasise the fact that quality is essential in performing an assurance engagement, and the importance to the quality of the assurance engagement of:

1. Performing work that complies with professional standards and regulatory and legal requirements.

2. Complying with the firm’s policies or procedures as applicable.

3. Issuing a report for the engagement that is appropriate in the circumstances.

4. The engagement team’s ability to raise concerns without fear of reprisals.

A64. A firm’s system of quality management includes establishing a monitoring and remediation process designed to:

1. Provide the firm with relevant, reliable and timely information about the design, implementation and operation of the system of quality management.

2. Take appropriate actions to respond to identified deficiencies such that deficiencies are remediated by the firm on a timely basis.

A65. Ordinarily, the engagement team may depend on the firm’s system of quality management unless:

• The engagement team’s understanding or practical experience indicates that the firm’s policies or procedures will not effectively address the nature and circumstances of the engagement; or

• Information provided by the firm or other parties, about the effectiveness of such policies or procedures suggests otherwise.

For example, the engagement team may depend on the firm’s system of quality management in relation to:

1. Competence and capabilities of personnel through their recruitment and formal training.

2. Independence through the accumulation and communication of relevant independence information.

3. Maintenance of client relationships through the firm’s policies or procedures for acceptance and continuance of client relationships and assurance engagements.

4. Adherence to regulatory and legal requirements through the firm’s monitoring and remediation process.

In considering deficiencies¹⁰ identified in the firm’s system of quality management that may affect the assurance engagement, the lead assurance practitioner may consider the remedial actions undertaken by the firm to address those deficiencies.

A66. A deficiency in the firm’s system of quality management does not necessarily indicate that an assurance engagement was not performed in accordance with professional standards and applicable legal and regulatory requirements, or that the assurance practitioner’s report was not appropriate.

A67. An assurance practitioner may be requested to perform assurance engagements with respect to a wide range of underlying subject matter and subject matter information. Some may require specialised skills and knowledge beyond those ordinarily possessed by a particular individual.

A68. Professional and Ethical Standard 1 provides requirements and guidance on the self-interest threat to compliance with the principle of professional competence and due care that is created if the engagement team does not possess, or cannot acquire, the competencies to perform the professional services¹¹. The assurance practitioner has sole responsibility for the assurance conclusion expressed, and that responsibility is not reduced by the assurance practitioner’s use of the work of an assurance practitioner’s expert. Nonetheless, if the assurance practitioner using the work of an assurance practitioner’s expert, having followed this ISAE (NZ), concludes that the work of that expert is adequate for the assurance practitioner’s purposes, the assurance practitioner may accept that expert’s findings or conclusions in the expert’s field as appropriate evidence.

A69. Professional and Ethical Standard 3 requires the firm to establish quality objectives that address the acceptance and continuance of client relationships and assurance engagements. The quality objectives deal with the appropriateness of judgements by the firm about whether to accept or continue relationships and engagements that are based on the firm’s ability to perform the engagement in accordance with professional standards and applicable legal and regulatory requirements.¹².

A70. Some of the assurance work may be performed by a multi-disciplinary team that includes one or more assurance practitioner’s expert. For example, an assurance practitioner’s expert may be needed to assist the assurance practitioner in obtaining an understanding of the underlying subject matter and other engagement circumstances or in one or more of the matters mentioned in paragraph 46R (in the case of a reasonable assurance engagement) or 46L (in the case of a limited assurance engagement).

A71. When the work of an assurance practitioner’s expert is to be used, it may be appropriate to perform some of the procedures required by paragraph 52 at the engagement acceptance or continuance stage.

A72. The subject matter information may include information upon which another assurance practitioner may have expressed a conclusion. The assurance practitioner, in concluding on the subject matter information, may decide to use the evidence on which that other assurance practitioner’s conclusion is based to provide evidence regarding the subject matter information.

A73. The work of another assurance practitioner may be used in relation to, for example, an underlying subject matter at a remote location or in a foreign jurisdiction. Such other assurance practitioners are not part of the engagement team. Relevant considerations when the engagement team plans to use the work of another assurance practitioner may include:

A74. Under Professional and Ethical Standard 3, the firm is required to establish a quality objective that addresses the nature, timing and extent of the direction and supervision of engagement teams and review of their work. Professional and Ethical Standard 3 also requires that such direction, supervision and review is planned and performed on the basis that the work performed by less experienced engagement team members is directed, supervised and reviewed by more experienced engagement team members¹³.

NZA74.1 Reviewing the work performed by the engagement team consists of consideration whether, for example:

NZA74.2 Timely reviews of the work performed of the following by the lead assurance practitioner at appropriate stages during the engagement allow significant matters to be resolved on a timely basis to the lead assurance practitioner’s satisfaction on or before the date of the assurance practitioner’s report:

NZA74.3 A lead assurance practitioner taking over an engagement during the engagement may apply the procedures as described in paragraphs NZA74.2 to review the work performed to the date of a change in order to assume the responsibilities of a lead assurance practitioner.

A75. Other matters that may be considered in an engagement quality review include:

1. The engagement team’s evaluation of the firm’s independence in relation to the engagement;

2. Whether appropriate consultation has taken place on matters involving differences of opinion or other difficult or contentious matters, and the conclusions arising from those consultations; and

3. Whether engagement documentation selected for review reflects the work performed in relation to the significant judgements and supports the conclusions reached.

A76. Professional scepticism is an attitude that includes being alert to, for example:

A77. Maintaining professional scepticism throughout the engagement is necessary if the assurance practitioner is, for example, to reduce the risks of:

A78. Professional scepticism is necessary to the critical assessment of evidence. This includes questioning inconsistent evidence and the reliability of documents and responses to enquiries. It also includes consideration of the sufficiency and appropriateness of evidence obtained in the light of the circumstances.

A79. Unless the engagement involves assurance about whether documents are genuine, the assurance practitioner may accept records and documents as genuine unless the assurance practitioner has reason to believe the contrary. Nevertheless, the assurance practitioner is required by paragraph 50 to consider the reliability of information to be used as evidence.

A80. The assurance practitioner cannot be expected to disregard past experience of the honesty and integrity of those who provide evidence. Nevertheless, a belief that those who provide evidence are honest and have integrity does not relieve the assurance practitioner of the need to maintain professional scepticism.

A81. Professional judgement is essential to the proper conduct of an assurance engagement. This is because interpretation of relevant ethical requirements and relevant ISAEs (NZ) or SAEs and the informed decisions required throughout the engagement cannot be made without the application of relevant training, knowledge, and experience to the facts and circumstances. Professional judgement is necessary in particular regarding decisions about:

A82. The distinguishing feature of the professional judgement expected of an assurance practitioner is that it is exercised by an assurance practitioner whose training, knowledge and experience have assisted in developing the necessary competencies to achieve reasonable judgement.

A83. The exercise of professional judgement in any particular case is based on the facts and circumstances that are known by the assurance practitioner. Consultation on difficult or contentious matters during the course of the engagement, both within the engagement team and between the engagement team and others at the appropriate level within or outside the firm assist the assurance practitioner in making informed and reasonable judgements, including the extent to which particular items in the subject matter information are affected by judgement of the appropriate party.

A84. Professional judgement can be evaluated based on whether the judgement reached reflects a competent application of assurance and measurement or evaluation principles and is appropriate in the light of, and consistent with, the facts and circumstances that were known to the assurance practitioner up to the date of the assurance practitioner’s assurance report.

A85. Professional judgement needs to be exercised throughout the engagement. It also needs to be appropriately documented. In this regard, paragraph 79 requires the assurance practitioner to prepare documentation sufficient to enable an experienced assurance practitioner, having no previous connection with the engagement, to understand the significant professional judgements made in reaching conclusions on significant matters arising during the engagement. Professional judgement is not to be used as the justification for decisions that are not otherwise supported by the facts and circumstances of the engagement or sufficient appropriate evidence.

A86. Planning involves the lead assurance practitioner, other key members of the engagement team, and any key assurance practitioner’s external experts developing an overall strategy for the scope, emphasis, timing and conduct of the engagement, and an engagement plan, consisting of a detailed approach for the nature, timing and extent of procedures to be performed, and the reasons for selecting them. Adequate planning helps to devote appropriate attention to important areas of the engagement, identify potential problems on a timely basis and properly organise and manage the engagement in order for it to be performed in an effective and efficient manner. Adequate planning also assists the assurance practitioner to properly assign work to engagement team members, and facilitates the direction and supervision of engagement team members, and the review of their work. Further, it assists, where applicable, the coordination of work done by other assurance practitioners and experts. The nature and extent of planning activities will vary with the engagement circumstances, for example the complexity of the underlying subject matter and criteria. Examples of the main matters that may be considered include:

A87. The assurance practitioner may decide to discuss elements of planning with the appropriate party(ies) to facilitate the conduct and management of the engagement (for example, to coordinate some of the planned procedures with the work of the appropriate party(ies)’s personnel). Although these discussions often occur, the overall engagement strategy and the engagement plan remain the assurance practitioner’s responsibility. When discussing matters included in the overall engagement strategy or engagement plan, care is required in order not to compromise the effectiveness of the engagement. For example, discussing the nature and timing of detailed procedures with the appropriate party(ies) may compromise the effectiveness of the engagement by making the procedures too predictable.

A88. Planning is not a discrete phase, but rather a continual and iterative process throughout the engagement. As a result of unexpected events, changes in conditions, or evidence obtained, the assurance practitioner may need to revise the overall strategy and engagement plan, and thereby the resulting planned nature, timing and extent of procedures.

A89. In smaller or less complex engagements, the entire engagement may be conducted by a very small engagement team, possibly involving the lead assurance practitioner (who may be a sole assurance practitioner) working without any other engagement team members. With a smaller team, co-ordination of, and communication between, team members is easier. Establishing the overall engagement strategy in such cases need not be a complex or time-consuming exercise; it varies according to the size of the entity, the complexity of the engagement, including the underlying subject matter and criteria, and the size of the engagement team. For example, in the case of a recurring engagement, a brief memorandum prepared at the completion of the previous period, based on a review of the working papers and highlighting issues identified in the engagement just completed, updated in the current period based on discussions with appropriate parties, can serve as the documented engagement strategy for the current engagement.

A90. If in the circumstances described in paragraph 43, the assurance practitioner continues with the engagement:

1. When, in the assurance practitioner’s professional judgement, the unsuitable applicable criteria or inappropriate underlying subject matter is likely to mislead the intended users, a qualified conclusion or adverse conclusion would be appropriate in the circumstances depending on how material and pervasive the matter is.

2. In other cases, a qualified conclusion or a disclaimer of conclusion would be appropriate depending on, in the assurance practitioner’s professional judgement, how material and pervasive the matter is.

A91. For example, if after accepting the engagement, the assurance practitioner discovers that the application of the applicable criteria leads to biased subject matter information, and the bias of the subject matter information is material and pervasive, then an adverse conclusion would be appropriate in the circumstances.

A92. Professional judgements about materiality are made in light of surrounding circumstances, but are not affected by the level of assurance, that is, for the same intended users and purpose, materiality for a reasonable assurance engagement is the same as for a limited assurance engagement because materiality is based on the information needs of intended users.

A93. The applicable criteria may discuss the concept of materiality in the context of the preparation and presentation of the subject matter information and thereby provide a frame of reference for the assurance practitioner in considering materiality for the engagement. Although applicable criteria may discuss materiality in different terms, the concept of materiality generally includes the matters discussed in paragraphs A92–A100. If the applicable criteria do not include a discussion of the concept of materiality, these paragraphs provide the assurance practitioner with a frame of reference.

A94. Misstatements, including omissions, are considered to be material if they, individually or in the aggregate, could reasonably be expected to influence relevant decisions of intended users taken on the basis of the subject matter information. The assurance practitioner’s consideration of materiality is a matter of professional judgement, and is affected by the assurance practitioner’s perception of the common information needs of intended users as a group. In this context, it is reasonable for the assurance practitioner to assume that intended users:

1. Have a reasonable knowledge of the underlying subject matter, and a willingness to study the subject matter information with reasonable diligence;

2. Understand that the subject matter information is prepared and assured to appropriate levels of materiality, and have an understanding of any materiality concepts included in the applicable criteria;

3. Understand any inherent uncertainties involved in the measuring or evaluating the underlying subject matter; and

4. Make reasonable decisions on the basis of the subject matter information taken as a whole.

Unless the engagement has been designed to meet the particular information needs of specific users, the possible effect of misstatements on specific users, whose information needs may vary widely, is not ordinarily considered. (See also paragraphs A16–A18).

A95. Materiality is considered in the context of qualitative factors and, when applicable, quantitative factors. The relative importance of qualitative factors and quantitative factors when considering materiality in a particular engagement is a matter for the assurance practitioner’s professional judgement.

A96. Qualitative factors may include such things as:

A97. Quantitative factors relate to the magnitude of misstatements relative to reported amounts for those aspects of the subject matter information, if any, that are:

A98. When quantitative factors are applicable, planning the engagement solely to detect individually material misstatements overlooks the fact that the aggregate of uncorrected and undetected individually immaterial misstatements may cause the subject matter information to be materially misstated. It may therefore be appropriate when planning the nature, timing and extent of procedures for the assurance practitioner to determine a quantity less than materiality as a basis for determining the nature, timing and extent of procedures.

A99. Materiality relates to the information covered by the assurance report. Therefore, when the engagement covers some, but not all, aspects of the information communicated about an underlying subject matter, materiality is considered in relation to only that portion that is covered by the engagement.

A100. Concluding on the materiality of the misstatements identified as a result of the procedures performed requires professional judgement. For example:

A101. Discussions between the lead assurance practitioner and other key members of the engagement team, and any key assurance practitioner’s external experts, about the susceptibility of the subject matter information to material misstatement, and the application of the applicable criteria to the facts and circumstances of the engagement, may assist the engagement team in planning and performing the engagement. It is also useful to communicate relevant matters to members of the engagement team, and to any assurance practitioner’s external experts not involved in the discussion.

A102. [Amended by the NZAuASB]

NZA102.1 The assurance practitioner may have additional responsibilities under law, regulation or relevant ethical requirements regarding an entity’s non-compliance with laws and regulations, which may differ from or go beyond the assurance practitioner’s responsibilities under this ISAE (NZ), such as:

1. Responding to identified or suspected non-compliance with laws and regulations, including requirements in relation to specific communications with management and those charged with governance and determining whether further action is needed;

2. Communicating identified or suspected non-compliance with laws and regulations to an auditor;¹⁴ and

3. Documentation requirements regarding identified or suspected non-compliance with laws and regulations.

Complying with any additional responsibilities may provide further information that is relevant to the assurance practitioner’s work in accordance with this and any other ISAE (NZ) or SAE (e.g., regarding the integrity of the responsible party or those charged with governance). Paragraphs A194-A199 further address the assurance practitioner’s responsibilities under law, regulation or relevant ethical requirements regarding communicating and reporting identified or suspected non-compliance with laws and regulations.

A103. Obtaining an understanding of the underlying subject matter and other engagement circumstances provides the assurance practitioner with a frame of reference for exercising professional judgement throughout the engagement, for example when:

A104. The assurance practitioner ordinarily has a lesser depth of understanding of the underlying subject matter and other engagement circumstances than the responsible party. The assurance practitioner also ordinarily has a lesser depth of understanding of the underlying subject matter and other engagement circumstances for a limited assurance engagement than for a reasonable assurance engagement, for example, while in some limited assurance engagements the assurance practitioner may obtain an understanding of internal control over the preparation of the subject matter information, this is often not the case.

A105. In a limited assurance engagement, identifying the areas where a material misstatement of the subject matter information is likely to arise enables the assurance practitioner to focus procedures on those areas. For example, in an engagement when the subject matter information is a sustainability report, the assurance practitioner may focus on certain areas of the sustainability report. The assurance practitioner may design and perform procedures over the entire subject matter information when the subject matter information consists of only a single area or when obtaining assurance over all areas of the subject matter information is necessary to obtain meaningful assurance.

A106. In a reasonable assurance engagement, understanding internal control over the subject matter information assists the assurance practitioner in identifying the types of misstatements and factors that affect the risks of material misstatements in the subject matter information. The assurance practitioner is required to evaluate the design of relevant controls and determines whether they have been implemented, by performing procedures in addition to enquiry of the responsible party. Professional judgement is needed to determine which controls are relevant in the engagement circumstances.

A107. In a limited assurance engagement, considering the process used to prepare the subject matter information assists the assurance practitioner in designing and performing procedures that address the areas where a material misstatement of the subject matter information is likely to arise. In considering the process used, the assurance practitioner uses professional judgement to determine which aspects of the process are relevant to the engagement, and may make enquiries of the appropriate party about those aspects.

A108. In both a reasonable assurance and a limited assurance engagement, the results of the entity’s risk assessment process may also assist the assurance practitioner in obtaining an understanding of the underlying subject matter and other engagement circumstances.

A109. The assurance practitioner chooses a combination of procedures to obtain reasonable assurance or limited assurance, as appropriate. The procedures listed below may be used, for example, for planning or performing the engagement, depending on the context in which they are applied by the assurance practitioner:

A110. Factors that may affect the assurance practitioner’s selection of procedures include: the nature of the underlying subject matter, the level of assurance to be obtained, and the information needs of the intended users and the engaging party, including relevant time and cost constraints.

A111. In some cases, a subject matter-specific ISAE (NZ) or SAE may include requirements that affect the nature, timing and extent of procedures. For example, a subject matter-specific ISAE (NZ) or SAE may describe the nature or extent of particular procedures to be performed or the level of assurance expected to be obtained in a particular type of engagement. Even in such cases, determining the exact nature, timing and extent of procedures is a matter of professional judgement and will vary from one engagement to the next.

A112. In some engagements, the assurance practitioner may not identify any areas where a material misstatement of the subject matter information is likely to arise. Irrespective of whether any such areas have been identified, the assurance practitioner designs and performs procedures to obtain a meaningful level of assurance.

A113. An assurance engagement is an iterative process, and information may come to the assurance practitioner’s attention that differs significantly from that on which the determination of planned procedures was based. As the assurance practitioner performs planned procedures, the evidence obtained may cause the assurance practitioner to perform additional procedures. Such procedures may include asking the measurer or evaluator to examine the matter identified by the assurance practitioner, and to make adjustments to the subject matter information if appropriate.

A114. The assurance practitioner may become aware of misstatements that are, after applying professional judgement, clearly not indicative of the existence of material misstatements. The following examples illustrate when additional procedures may not be needed because, in the assurance practitioner’s professional judgement, the identified misstatements are clearly not indicative of the existence of material misstatements:

A115. The assurance practitioner may become aware of a matter(s) that causes the assurance practitioner to believe that the subject matter information may be materially misstated. The following examples illustrate when additional procedures may be needed as the identified misstatements indicate that the subject matter information may be materially misstated:

A116. If, in the case of a limited assurance engagement, a matter(s) comes to the assurance practitioner’s attention that causes the assurance practitioner to believe the subject matter information may be materially misstated, the assurance practitioner is required by paragraph 49L to design and perform additional procedures. Additional procedures may include, for example, inquiring of the appropriate party(ies) or performing other procedures as appropriate in the circumstances.

A117. If, having performed the additional procedures required by paragraph 49L, the assurance practitioner is not able to obtain sufficient appropriate evidence to either conclude that the matter(s) is not likely to cause the subject matter information to be materially misstated or determine that it does cause the subject matter information to be materially misstated, a scope limitation exists and paragraph 66 applies.

A118. The assurance practitioner’s judgement about the nature, timing and extent of additional procedures that are needed to obtain evidence to either conclude that a material misstatement is not likely, or determine that a material misstatement exists, is, for example, guided by:

A119. Uncorrected misstatements are accumulated during the engagement (see paragraph 51) for the purpose of evaluating whether, individually or in aggregate, they are material when forming the assurance practitioner’s conclusion.

A120. The assurance practitioner may designate an amount below which misstatements would be clearly trivial and would not need to be accumulated because the assurance practitioner expects that the accumulation of such amounts clearly would not have a material effect on the subject matter information. “Clearly trivial” is not another expression for “not material.” Matters that are clearly trivial will be of a wholly different (smaller) order of magnitude than materiality determined in accordance with paragraph 44, and will be matters that are clearly inconsequential, whether taken individually or in aggregate and whether judged by any criteria of size, nature or circumstances. When there is any uncertainty about whether one or more items are clearly trivial, the matter is considered not to be clearly trivial.

A121. The following matters are often relevant when determining the nature, timing and extent of procedures with respect to the work of an assurance practitioner’s expert when some of the assurance work is performed by one or more assurance practitioner’s expert (see paragraph 70):

1. The significance of that expert’s work in the context of the engagement (see also paragraphs A122–A123);

2. The nature of the matter to which that expert’s work relates;

3. The risks of material misstatement in the matter to which that expert’s work relates;

4. The assurance practitioner’s knowledge of and experience with previous work performed by that expert; and

5. Whether that expert is subject to the assurance practitioner’s firm’s quality management policies or procedures (see also paragraphs A124–A125).

A122. Assurance engagements may be performed on a wide range of underlying subject matters that require specialised skills and knowledge beyond those possessed by the lead assurance practitioner and other members of the engagement team and for which the work of an assurance practitioner’s expert is used. In some situations, the assurance practitioner’s expert will be consulted to provide advice on an individual matter, but the greater the significance of the assurance practitioner’s expert’s work in the context of the engagement, the more likely it is that expert will work as part of a multi-disciplinary team comprising subject matter experts and other assurance personnel. The more that expert’s work is integrated in nature, timing and extent with the overall work effort, the more important is effective two-way communication is between the assurance practitioner’s expert and other assurance personnel. Effective two-way communication facilitates the proper integration of the expert’s work with the work of others on the engagement.

A123. As noted in paragraph A71, when the work of an assurance practitioner’s expert is to be used, it may be appropriate to perform some of the procedures required by paragraph 52 at the engagement acceptance or continuance stage. This is particularly so when the work of the assurance practitioner’s expert will be fully integrated with the work of other assurance personnel and when the work of the assurance practitioner’s expert is to be used in the early stages of the engagement, for example during initial planning and risk assessment.

A124. An assurance practitioner’s internal expert may be a partner or staff, including temporary staff, of the assurance practitioner’s firm, and therefore subject to the firm’s system of quality management, including its policies or procedures, in accordance with Professional and Ethical Standard 3 or other professional requirements, or requirements in law or regulation, that are at least as demanding as Professional and Ethical Standard 3. Alternatively, an assurance practitioner’s internal expert may be a partner or staff, including temporary staff, of a network firm, which may share common quality management policies or procedures with the assurance practitioner’s firm. An assurance practitioner’s external expert is not a member of the engagement team.

A125. Ordinarily, the engagement team may depend on the firm’s system of quality management (see paragraph A65). The extent of dependence will vary with the circumstances, and may affect the nature, timing and extent of the assurance practitioner’s procedures with respect to such matters as:

• Competence and capabilities, through recruitment and training programs.

• The assurance practitioner’s evaluation of the objectivity of the assurance practitioner’s expert. Assurance practitioner’s internal experts are subject to relevant ethical requirements, including those pertaining to independence.

• The assurance practitioner’s evaluation of the adequacy of the assurance practitioner’s expert’s work. For example, the firm’s training programs may provide the assurance practitioner’s internal experts with an appropriate understanding of the interrelationship of their expertise with the evidence gathering process. Depending on such training and other firm processes, such as protocols for scoping the work of the assurance practitioner’s internal experts, may affect the nature, timing and extent of the assurance practitioner’s procedures to evaluate the adequacy of the assurance practitioner’s expert’s work.

• Adherence to regulatory and legal requirements, through the firm’s monitoring and remediation process.

• Agreement with the assurance practitioner’s expert.

Such dependence does not reduce the assurance practitioner’s responsibility to meet the requirements of this ISAE (NZ).

A126. Information regarding the competence, capabilities and objectivity of an assurance practitioner’s expert may come from a variety of sources, such as:

A127. While assurance practitioner’s experts do not require the same proficiency as the assurance practitioner in performing all aspects of an assurance engagement, an assurance practitioner’s experts whose work is used may need a sufficient understanding of relevant ISAEs (NZ) or SAEs to enable that expert to relate the work assigned to them to the engagement objective.

A128. The evaluation of whether the threats to objectivity are at an acceptable level may depend upon the role of the assurance practitioner’s expert and the significance of the expert’s work in the context of the engagement. In some cases it may not be possible to eliminate circumstances that create threats or apply safeguards to reduce threats to an acceptable level, for example, if a proposed assurance practitioner’s expert is an individual who has played a significant role in preparing the subject matter information.

A129. When evaluating the objectivity of an assurance practitioner’s external expert, it may be relevant to:

• Enquire of the appropriate party(ies) about any known interests or relationships that the appropriate party(ies) has with the assurance practitioner’s external expert that may affect that expert’s objectivity.

• Discuss with that expert any applicable safeguards, including any professional requirements that apply to that expert; and evaluate whether the safeguards are adequate to reduce threats to an acceptable level. Interests and relationships that it may be relevant to discuss with the assurance practitioner’s expert include:

• • Financial interests.

  • Business and personal relationships.

  • Provision of other services by the expert, including by the organisation in the case of an external expert that is an organisation.

In some cases, it may also be appropriate for the assurance practitioner to obtain a written representation from the assurance practitioner’s external expert about any interests or relationships with the appropriate party(ies) of which that expert is aware.

A130. Having a sufficient understanding of the field of expertise of the assurance practitioner’s expert enables the assurance practitioner to:

1. Agree with the assurance practitioner’s expert the nature, scope and objectives of that expert’s work for the assurance practitioner’s purposes; and

2. Evaluate the adequacy of that work for the assurance practitioner’s purposes.

A131. Aspects of the assurance practitioner’s expert’s field relevant to the assurance practitioner’s understanding may include:

A132. It may be appropriate for the assurance practitioner’s agreement with the assurance practitioner’s expert to also include matters such as the following:

1. The respective roles and responsibilities of the assurance practitioner and that expert;

2. The nature, timing and extent of communication between the assurance practitioner and that expert, including the form of any report to be provided by that expert; and

3. The need for the assurance practitioner’s expert to observe confidentiality requirements.

A133. The matters noted in paragraph A125 may affect the level of detail and formality of the agreement between the assurance practitioner and the assurance practitioner’s expert, including whether it is appropriate that the agreement be in writing. The agreement between the assurance practitioner and an assurance practitioner’s external expert is often in the form of an engagement letter.

A134. The following matters may be relevant when evaluating the adequacy of the assurance practitioner’s expert’s work for the assurance practitioner’s purposes:

1. The relevance and reasonableness of that expert’s findings or conclusions, and their consistency with other evidence;

2. If that expert’s work involves use of significant assumptions and methods, the relevance and reasonableness of those assumptions and methods in the circumstances; and

3. If that expert’s work involves the use of source data that is significant to that expert’s work, the relevance, completeness, and accuracy of that source data.

A135. If the assurance practitioner determines that the work of the assurance practitioner’s expert is not adequate for the assurance practitioner’s purposes, options available to the assurance practitioner include:

1. Agreeing with that expert on the nature and extent of further work to be performed by that expert; or

2. Performing additional procedures appropriate to the circumstances.

A136. While paragraphs A121–A135 have been written in the context of using work performed by an assurance practitioner’s expert, they may also provide helpful guidance with respect to using work performed by another assurance practitioner, a responsible party’s or measurer’s or evaluator’s expert or an internal auditor.

A137. Written confirmation of oral representations reduces the possibility of misunderstandings between the assurance practitioner and the appropriate party(ies). The person(s) from whom the assurance practitioner requests written representations will ordinarily be a member of senior management or those charged with governance depending on, for example, the management and governance structure of the appropriate party(ies), which may vary by jurisdiction and by entity, reflecting influences such as different cultural and legal backgrounds, and size and ownership characteristics.

A138. Other written representations requested may include the following:

A139. Representations by the appropriate party(ies) cannot replace other evidence the assurance practitioner could reasonably expect to be available. Although written representations provide necessary evidence, they do not provide sufficient appropriate evidence on their own about any of the matters with which they deal. Furthermore, the fact that the assurance practitioner has received reliable written representations does not affect the nature or extent of other evidence that the assurance practitioner obtains.

A140. Circumstances in which the assurance practitioner may not be able to obtain requested written representations include, for example, when:

• The responsible party contracts a third party to perform the relevant measurement or evaluation and later engages the assurance practitioner to undertake an assurance engagement on the resultant subject matter information. In some such cases, for example where the responsible party has an ongoing relationship with the measurer or evaluator, the responsible party may be able to arrange for the measurer or evaluator to provide requested written representations, or the responsible party may be in a position to provide such representations if the responsible party has a reasonable basis for doing so, but, in other cases, this may not be so.

• An intended user engages the assurance practitioner to undertake an assurance engagement on publicly available information but does not have a relationship with the responsible party of the kind necessary to ensure that party responds to the assurance practitioner’s request for a written representation.

• The assurance engagement is undertaken against the wishes of the measurer or evaluator. This may be the case when, for example, the engagement is undertaken pursuant to a court order, or a public sector assurance practitioner is required by the legislature or other competent authority to undertake a particular engagement.

In these or similar circumstances, the assurance practitioner may not have access to the evidence needed to support the assurance practitioner’s conclusion. If this is the case, paragraph 66 of this ISAE (NZ) applies.

A141. Consideration of subsequent events in some assurance engagements may not be relevant because of the nature of the underlying subject matter. For example, when the engagement requires a conclusion about the accuracy of a statistical return at a point in time, events occurring between that point in time and the date of the assurance report may not affect the conclusion or require disclosure in the return or the assurance report.

A142. As noted in paragraph 61, the assurance practitioner has no responsibility to perform any procedures regarding the subject matter information after the date of the assurance practitioner’s report. However, if, after the date of the assurance practitioner’s report, a fact becomes known to the assurance practitioner that, had it been known to the assurance practitioner at the date of the assurance practitioner’s report, may have caused the assurance practitioner to amend the report, the assurance practitioner may need to discuss the matter with the appropriate party(ies) or take other action as appropriate in the circumstances.

A143. Further actions that may be appropriate if the assurance practitioner identifies a material inconsistency or becomes aware of a material misstatement of fact include, for example:

A144. The description of the applicable criteria advises intended users of the framework on which the subject matter information is based, and is particularly important when there are significant differences between various criteria regarding how particular matters may be treated in the subject matter information.

A145. A description that the subject matter information is prepared in accordance with particular applicable criteria is appropriate only if the subject matter information complies with all relevant requirements of those applicable criteria that are effective.

A146. A description of the applicable criteria that contains imprecise qualifying or limiting language (for example, “the subject matter information is in substantial compliance with the requirements of XYZ”) is not an adequate description as it may mislead users of the subject matter information.

A147. Evidence is necessary to support the assurance practitioner’s conclusion and assurance report. It is cumulative in nature and is primarily obtained from procedures performed during the course of the engagement. It may, however, also include information obtained from other sources such as previous engagements (provided the assurance practitioner has determined whether changes have occurred since the previous engagement that may affect its relevance to the current engagement) or a firm’s policies or procedures for the acceptance and continuance of client relationships and assurance engagements. Evidence may come from sources inside and outside the appropriate party(ies). Also, information that may be used as evidence may have been prepared by an expert employed or engaged by the appropriate party(ies). Evidence comprises both information that supports and corroborates aspects of the subject matter information, and any information that contradicts aspects of the subject matter information. In addition, in some cases, the absence of information (for example, refusal by the appropriate party(ies) to provide a requested representation) is used by the assurance practitioner, and therefore, also constitutes evidence. Most of the assurance practitioner’s work in forming the assurance conclusion consists of obtaining and evaluating evidence.

A148. The sufficiency and appropriateness of evidence are interrelated. Sufficiency is the measure of the quantity of evidence. The quantity of evidence needed is affected by the risks of the subject matter information being materially misstated (the higher the risks, the more evidence is likely to be required) and also by the quality of such evidence (the higher the quality, the less may be required). Obtaining more evidence, however, may not compensate for its poor quality.

A149. Appropriateness is the measure of the quality of evidence; that is, its relevance and its reliability in providing support for the assurance practitioner’s conclusion. The reliability of evidence is influenced by its source and by its nature, and is dependent on the individual circumstances under which it is obtained. Generalisations about the reliability of various kinds of evidence can be made; however, such generalisations are subject to important exceptions. Even when evidence is obtained from sources external to the appropriate party(ies), circumstances may exist that could affect its reliability. For example, evidence obtained from an external source may not be reliable if the source is not knowledgeable or objective. While recognising that exceptions may exist, the following generalisations about the reliability of evidence may be useful:

A150. The assurance practitioner ordinarily obtains more assurance from consistent evidence obtained from different sources or of a different nature than from items of evidence considered individually. In addition, obtaining evidence from different sources or of a different nature may indicate that an individual item of evidence is not reliable. For example, corroborating information obtained from a source independent of the appropriate party(ies) may increase the assurance the assurance practitioner obtains from a representation from the appropriate party(ies). Conversely, when evidence obtained from one source is inconsistent with that obtained from another, the assurance practitioner determines what additional procedures are necessary to resolve the inconsistency.

A151. In terms of obtaining sufficient appropriate evidence, it is generally more difficult to obtain assurance about subject matter information covering a period than about subject matter information at a point in time. In addition, conclusions provided on processes ordinarily are limited to the period covered by the engagement; the assurance practitioner provides no conclusion about whether the process will continue to function in the specified manner in the future.

A152. Whether sufficient appropriate evidence has been obtained on which to base the assurance practitioner’s conclusion is a matter of professional judgement.

A153. In some circumstances, the assurance practitioner may not have obtained the sufficiency or appropriateness of evidence that the assurance practitioner had expected to obtain through the planned procedures. In these circumstances, the assurance practitioner considers that the evidence obtained from the procedures performed is not sufficient and appropriate to be able to form a conclusion on the subject matter information. The assurance practitioner may:

• Extend the work performed; or

• Perform other procedures judged by the assurance practitioner to be necessary in the circumstances.

Where neither of these is practicable in the circumstances, the assurance practitioner will not be able to obtain sufficient appropriate evidence to be able to form a conclusion. This situation may arise even though the assurance practitioner has not become aware of a matter(s) that causes the assurance practitioner to believe the subject matter information may be materially misstated, as addressed in paragraph 49L.

A154. An assurance engagement is a cumulative and iterative process. As the assurance practitioner performs planned procedures, the evidence obtained may cause the assurance practitioner to change the nature, timing or extent of other planned procedures. Information may come to the assurance practitioner’s attention that differs significantly from that expected and upon which planned procedures were based. For example:

• The extent of misstatements that the assurance practitioner identifies may alter the assurance practitioner’s professional judgement about the reliability of particular sources of information.

• The assurance practitioner may become aware of discrepancies in relevant information, or inconsistent or missing evidence.

• If analytical procedures were performed towards the end of the engagement, the results of those procedures may indicate a previously unrecognised risk of material misstatement.

In such circumstances, the assurance practitioner may need to re-evaluate the planned procedures.

A155. The assurance practitioner’s professional judgement as to what constitutes sufficient appropriate evidence is influenced by such factors as the following:

• Significance of a potential misstatement and the likelihood of its having a material effect, individually or when aggregated with other potential misstatements, on the subject matter information.

• Effectiveness of the appropriate party(ies)’s responses to address the known risk of material misstatement.

• Experience gained during previous assurance engagements with respect to similar potential misstatements.

• Results of procedures performed, including whether such procedures identified specific misstatements.

• Source and reliability of the available information.

• Persuasiveness of the evidence.

• Understanding of the appropriate party(ies) and its environment.

A156. A scope limitation may arise from:

1. Circumstances beyond the control of the appropriate party(ies). For example, documentation the assurance practitioner considers it necessary to inspect may have been accidentally destroyed;

2. Circumstances relating to the nature or timing of the assurance practitioner’s work. For example, a physical process the assurance practitioner considers it necessary to observe may have occurred before the assurance practitioner’s engagement; or

3. Limitations imposed by the responsible party, the measurer or evaluator, or the engaging party on the assurance practitioner that, for example, may prevent the assurance practitioner from performing a procedure the assurance practitioner considers to be necessary in the circumstances. Limitations of this kind may have other implications for the engagement, such as for the assurance practitioner’s consideration of engagement risk and the acceptance and continuance of the client relationship and the assurance engagement.

A157. An inability to perform a specific procedure does not constitute a scope limitation if the assurance practitioner is able to obtain sufficient appropriate evidence by performing alternative procedures.

A158. The procedures performed in a limited assurance engagement are, by definition, limited compared with that necessary in a reasonable assurance engagement. Limitations known to exist prior to accepting a limited assurance engagement are a relevant consideration when establishing whether the preconditions for an assurance engagement are present, in particular, whether the engagement exhibits the characteristics of access to evidence (see paragraph 24(b)(iv)) and a rational purpose (see paragraph 24(b)(vi)). If a further limitation is imposed by the appropriate party(ies) after a limited assurance engagement has been accepted, it may be appropriate to withdraw from the engagement, where withdrawal is possible under applicable law or regulation.

A159. Oral and other forms of expressing conclusions can be misunderstood without the support of a written report. For this reason, the assurance practitioner does not report orally or by use of symbols without also providing a written assurance report that is readily available whenever the oral report is provided or the symbol is used. For example, a symbol could be hyperlinked to a written assurance report on the Internet.

A160. This ISAE (NZ) does not require a standardised format for reporting on all assurance engagements. Instead it identifies the basic elements the assurance report is to include. Assurance reports are tailored to the specific engagement circumstances. The assurance practitioner may use headings, paragraph numbers, typographical devices, for example the bolding of text, and other mechanisms to enhance the clarity and readability of the assurance report.

A161. The assurance practitioner may choose a “short-form” or “long-form” style of reporting to facilitate effective communication to the intended users. “Short-form” reports ordinarily include only the basic elements. “Long-form” reports include other information and explanations that are not intended to affect the assurance practitioner’s conclusion. In addition to the basic elements, long-form reports may describe in detail the terms of the engagement, the applicable criteria being used, findings relating to particular aspects of the engagement, details of the qualifications and experience of the assurance practitioner and others involved with the engagement, disclosure of materiality levels, and, in some cases, recommendations. The assurance practitioner may find it helpful to consider the significance of providing such information to the information needs of the intended users. As required by paragraph 68, additional information is clearly separated from the assurance practitioner’s conclusion and phrased in such a manner so as make it clear that it is not intended to detract from that conclusion.

Assurance Report Content Title (Ref: Para. 69(a))

A162. An appropriate title helps to identify the nature of the assurance report, and to distinguish it from reports issued by others, such as those who do not have to comply with the same ethical requirements as the assurance practitioner.

A163. An addressee identifies the party or parties to whom the assurance report is directed. The assurance report is ordinarily addressed to the engaging party, but, in some cases, there may be other intended users.

A164. Identification and description of the subject matter information and, when appropriate, the underlying subject matter may include, for example:

• The point in time or period of time to which the measurement or evaluation of the underlying subject matter relates.

• Where applicable, the name of the responsible party or component of the responsible party to which the underlying subject matter relates.

• An explanation of those characteristics of the underlying subject matter or the subject matter information of which the intended users should be aware, and how such characteristics may influence the precision of the measurement or evaluation of the underlying subject matter against the applicable criteria, or the persuasiveness of available evidence. For example:

○ The degree to which the subject matter information is qualitative versus quantitative, objective versus subjective, or historical versus prospective.

○ Changes in the underlying subject matter or other engagement circumstances that affect the comparability of the subject matter information from one period to the next.

A165. The assurance report identifies the applicable criteria against which the underlying subject matter was measured or evaluated so the intended users can understand the basis for the assurance practitioner’s conclusion. The assurance report may include the applicable criteria, or refer to them if they are included in the subject matter information or if they are otherwise available from a readily accessible source. It may be relevant in the circumstances, to disclose:

A166. While in some cases, inherent limitations can be expected to be well understood by the intended users of an assurance report; in other cases it may be appropriate to make explicit reference to them in the assurance report. For example, in an assurance report related to the effectiveness of internal control, it may be appropriate to note that the historic evaluation of effectiveness is not relevant to future periods due to the risk that internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

A167. In some cases, the applicable criteria used to measure or evaluate the underlying subject matter may be designed for a specific purpose. For example, a regulator may require certain entities to use particular applicable criteria designed for regulatory purposes. To avoid misunderstandings, the assurance practitioner alerts readers of the assurance report to this fact and that, therefore, the subject matter information may not be suitable for another purpose.

A168. In addition to the alert required by paragraph 69(f), the assurance practitioner may consider it appropriate to indicate that the assurance report is intended solely for specific users. Depending on the engagement circumstances, for example, the law or regulation of the particular jurisdiction, this may be achieved by restricting the distribution or use of the assurance report. While an assurance report may be restricted in this way, the absence of a restriction regarding a particular user or purpose does not itself indicate that a legal responsibility is owed by the assurance practitioner in relation to that user or for that purpose. Whether a legal responsibility is owed will depend on the legal circumstances of each case and the relevant jurisdiction.

A169. Identifying relative responsibilities informs the intended users that the responsible party is responsible for the underlying subject matter, that the measurer or evaluator is responsible for the measurement or evaluation of the underlying subject matter against the applicable criteria, and that the assurance practitioner’s role is to independently express a conclusion about the subject matter information.

A170. Where a subject matter specific ISAE (NZ) or SAE applies to only part of the subject matter information, it may be appropriate to cite both that subject matter specific ISAE (NZ) or SAE and this ISAE (NZ).

A171. A statement that contains imprecise qualifying or limiting language (for example “the engagement was performed by reference to ISAE (NZ) 3000 (Revised)”) may mislead users of assurance reports.

A172. The following is an illustration of a statement in the assurance report regarding applicable quality management requirements:

The firm applies Professional and Ethical Standard 3, which requires the firm to design, implement and operate a system of quality management including documented policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

A173.The following is an illustration of a statement in the assurance report regarding compliance with ethical requirements:

We have complied with the independence and other ethical requirements of Professional and Ethical Standard 1International Code of Ethics for Assurance Practitioners (including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

A174. The summary of the work performed helps the intended users understand the assurance practitioner’s conclusion. For many assurance engagements, infinite variations in procedures are possible in theory. In practice, however, these are difficult to communicate clearly and unambiguously. Other authoritative pronouncements issued by the New Zealand Auditing and Assurance Standards Board may be useful to assurance practitioners in preparing the summary.

A175. Where no specific ISAE (NZ) or SAE provides guidance on procedures for a particular underlying subject matter, the summary might include a more detailed description of the work performed. It may be appropriate to include in the summary a statement that the work performed included evaluating the suitability of the applicable criteria.

A176. In a limited assurance engagement the summary of the work performed is ordinarily more detailed than for a reasonable assurance engagement and identifies the limitations on the nature, timing and extent of procedures. This is because an appreciation of the nature, timing and extent of procedures performed is essential to understanding a conclusion expressed in a form that conveys whether, based on the procedures performed, a material matter(s) has come to the assurance practitioner’s attention to cause the assurance practitioner to believe the subject matter information is materially misstated. It also may be appropriate to indicate in the summary of the work performed certain procedures that were not performed that would ordinarily be expected to be performed in a reasonable assurance engagement. However, a complete identification of all such procedures may not be possible because the assurance practitioner’s required understanding and consideration of engagement risk is less than in a reasonable assurance engagement.

A177. Factors to consider in determining the level of detail to be provided in the summary of the work performed may include:

A178. It is important that the summary be written in an objective way that allows intended users to understand the work done as the basis for the assurance practitioner’s conclusion. In most cases, this will not involve detailing the entire work plan, but on the other hand it is important for it not to be so summarised as to be ambiguous, nor written in a way that is overstated or embellished.

A179. Examples of conclusions expressed in a form appropriate for a reasonable assurance engagement include:

A180. It may be appropriate to inform the intended users of the context in which the assurance practitioner’s conclusion is to be read when the assurance report includes an explanation of particular characteristics of the underlying subject matter of which the intended users should be aware. The assurance practitioner’s conclusion may, for example, include wording such as: “This conclusion has been formed on the basis of the matters outlined elsewhere in this independent assurance report.”

A181. Examples of conclusions expressed in a form appropriate for a limited assurance engagement include:

A182. Forms of expression that may be useful for underlying subject matters include, for example, one, or a combination of, the following:

A183. Inclusion of a heading above paragraphs containing modified conclusions, and the matter(s) giving rise to the modification, aids the understandability of the assurance practitioner’s report. Examples of appropriate heading include “Qualified Conclusion,” “Adverse Conclusion,” or “Disclaimer of Conclusion” and “Basis for Qualified Conclusion,” “Basis for Adverse Conclusion,” as appropriate.

A184. The assurance practitioner’s signature is either in the name of the assurance practitioner’s firm, the personal name of the individual assurance practitioner or both, as appropriate for the particular jurisdiction. In addition to the assurance practitioner’s signature, in certain jurisdictions, the assurance practitioner may be required to make a declaration in the assurance practitioner’s report about professional designations or recognition by the appropriate licensing authority in that jurisdiction.

A185. Including the assurance report date informs the intended users that the assurance practitioner has considered the effect on the subject matter information and on the assurance report of events that occurred up to that date.

A186. In some cases, law or regulation may require a reference to the work of an assurance practitioner’s expert in the assurance report, for example, for the purposes of transparency in the public sector. It may also be appropriate in other circumstances, for example, to explain the nature of a modification of the assurance practitioner’s conclusion, or when the work of an expert is integral to findings included in a long-form report.

A187. Nonetheless, the assurance practitioner has sole responsibility for the conclusion expressed, and that responsibility is not reduced by the assurance practitioner’s use of the work of an assurance practitioner’s expert. It is important therefore that if the assurance report refers to a assurance practitioner’s expert, that the wording of that report does not imply that the assurance practitioner’s responsibility for the conclusion expressed is reduced because of the involvement of that expert.

A188. A generic reference in a long-form report to the engagement having been conducted by suitably qualified personnel including subject matter experts and assurance specialists is unlikely to be misunderstood as reduced responsibility. The potential for misunderstanding is higher, however, in the case of short-form reports, where minimum contextual information is able to be presented, or when the assurance practitioner’s expert is referred to by name. Therefore, additional wording may be needed in such cases to prevent the assurance report implying that the assurance practitioner’s responsibility for the conclusion expressed is reduced because of the involvement of the expert.

A189. The term ‘pervasive’ describes the effects on the subject matter information of misstatements or the possible effects on the subject matter information of misstatements, if any that are undetected due to an inability to obtain sufficient appropriate evidence. Pervasive effects on the subject matter information are those that, in the assurance practitioner’s professional judgement:

1. Are not confined to specific aspects of the subject matter information;

2. If so confined, represent or could represent a substantial proportion of the subject matter information; or

3. In relation to disclosures, are fundamental to the intended users’ understanding of the subject matter information.

A190. The nature of the matter, and the assurance practitioner’s judgement about the pervasiveness of the effects or possible effects on the subject matter information, affects the type of conclusion to be expressed.

A191. Examples of qualified and adverse conclusions and a disclaimer of conclusion are:

• Qualified conclusion (an example for limited assurance engagements with a material misstatement) – “Based on the procedures performed and the evidence obtained, except for the effect of the matter described in the Basis for Qualified Conclusion section of our report, nothing has come to our attention that causes us to believe that the [appropriate party’s] statement does not present fairly, in all material respects, the entity’s compliance with XYZ law.”

• Adverse conclusion (an example for a material and pervasive misstatement for both reasonable assurance and limited assurance engagements) – “Because of the significance of the matter described in the Basis for Adverse Conclusion section of our report, the [appropriate party’s] statement does not present fairly the entity’s compliance with XYZ law.

• Disclaimer of conclusion (an example for a material and pervasive limitation of scope for both reasonable assurance and limited assurance engagements) – “Because of the significance of the matter described in the Basis for Disclaimer of Conclusion section of our report, we have not been able to obtain sufficient appropriate evidence to form a conclusion on the [appropriate party’s] statement. Accordingly, we do not express a conclusion on that statement.”

A192. In some cases, the measurer or evaluator may identify and properly describe that the subject matter information is materially misstated. For example, in a compliance engagement the measurer or evaluator may correctly describe the instances of non-compliance. In such circumstances, paragraph 77 requires the assurance practitioner to draw the intended users’ attention to the description of the material misstatement, by either expressing a qualified or adverse conclusion or by expressing an unqualified conclusion but emphasising the matter by specifically referring to it in the assurance report.

A193. Matters that may be appropriate to communicate with the responsible party, the measurer or evaluator, the engaging party or others include fraud or suspected fraud, and bias in the preparation of the subject matter information.

A194. Relevant ethical requirements may include a requirement to report identified or suspected non-compliance with laws and regulations to an appropriate level of management or those charged with governance. In some jurisdictions, law or regulation may restrict the assurance practitioner’s communication of certain matters with the responsible party, management or those charged with governance. Law or regulation may specifically prohibit a communication, or other action, that might prejudice an investigation by an appropriate authority into an actual, or suspected, illegal act, including alerting the entity, for example, when the assurance practitioner is required to report the identified or suspected non-compliance to an appropriate authority pursuant to anti-money laundering legislation. In these circumstances, the issues considered by the assurance practitioner may be complex and the assurance practitioner may consider it appropriate to obtain legal advice.

A195. Law, regulation or relevant ethical requirements may:

1. Require the assurance practitioner to report identified or suspected non-compliance with laws and regulations to an appropriate authority outside the entity.

2. Establish responsibilities under which reporting to an appropriate authority outside the entity may be appropriate in the circumstances. ¹⁵

A196. Reporting identified or suspected non-compliance with laws and regulations to an appropriate authority outside the entity may be required or appropriate in the circumstances because:

1. Law, regulation or relevant ethical requirements require the assurance practitioner to report;

2. The assurance practitioner has determined reporting is an appropriate action to respond to identified or suspected non-compliance in accordance with relevant ethical requirements; or

3. Law, regulation or relevant ethical requirements provide the assurance practitioner with the right to do so.

A197. The reporting of identified or suspected non-compliance with laws and regulations in accordance with law, regulation or relevant ethical requirements may include non-compliance with laws and regulations that the assurance practitioner comes across or is made aware of when performing the engagement but which may not affect the subject matter information. Under this ISAE (NZ), the assurance practitioner is not expected to have a level of understanding of laws and regulations beyond those affecting the subject matter information. However, law, regulation or relevant ethical requirements may expect the assurance practitioner to apply knowledge, professional judgement and expertise in responding to such non-compliance. Whether an act constitutes actual non-compliance is ultimately a matter to be determined by a court or other appropriate adjudicative body.

A198. In some circumstances, the reporting of identified or suspected non-compliance with laws and regulations to an appropriate authority outside the entity may be precluded by the assurance practitioner’s duty of confidentiality under law, regulation, or relevant ethical requirements. In other cases, reporting identified or suspected non-compliance to an appropriate authority outside the entity would not be considered a breach of the duty of confidentiality under the relevant ethical requirements.¹⁶

A199. The assurance practitioner may consider consulting internally (e.g., within the firm or network firm), obtaining legal advice to understand the professional or legal implications of taking any particular course of action, or consulting on a confidential basis with a regulator or a professional body (unless doing so is prohibited by law or regulations or would breach the duty of confidentiality).¹⁷

A200. Documentation includes a record of the assurance practitioner’s reasoning on all significant matters that require the exercise of professional judgement, and related conclusions. When difficult questions of principle or professional judgement exist, documentation that includes the relevant facts that were known by the assurance practitioner at the time the conclusion was reached may assist in demonstrating the assurance practitioner’s knowledge.

A201. It is neither necessary nor practical to document every matter considered, or professional judgement made, during an engagement. Further, it is unnecessary for the assurance practitioner to document separately (as in a checklist, for example) compliance with matters for which compliance is demonstrated by documents included within the engagement file. Similarly, the assurance practitioner need not include in the engagement file superseded drafts of working papers, notes that reflect incomplete or preliminary thinking, previous copies of documents corrected for typographical or other errors, and duplicates of documents.

A202. In applying professional judgement to assessing the extent of documentation to be prepared and retained, the assurance practitioner may consider what is necessary to provide an understanding of the work performed and the basis of the principal decisions taken (but not the detailed aspects of the engagement) to another assurance practitioner who has no previous experience with the engagement. That other assurance practitioner may only be able to obtain an understanding of detailed aspects of the engagement by discussing them with the assurance practitioner who prepared the documentation.

A203. Documentation may include a record of, for example:

• The identifying characteristics of the specific items or matters tested;

• Who performed the engagement work and the date such work was completed;

• Who reviewed the engagement work performed and the date and extent of such review; and

• Discussions of significant matters with the appropriate party(ies) and others, including the nature of the significant matters discussed and when and with whom the discussions took place.

A204. Documentation may include a record of, for example:

• Issues identified with respect to compliance with relevant ethical requirements and how they were resolved.

• Conclusions on compliance with independence requirements that apply to the engagement, and any relevant discussions with the firm that support these conclusions.

• Conclusions reached regarding the acceptance and continuance of client relationships and assurance engagements.

• The nature and scope of, and conclusions resulting from, consultations undertaken during the course of the engagement.

A205. Professional and Ethical Standard 3 (or other professional requirements, or requirements in law or regulation that are at least as demanding as Professional and Ethical Standard 3) requires firms to establish a quality objective that addresses the assembly of engagement documentation on a timely basis after the date of the engagement report¹⁸. An appropriate time limit within which to complete the assembly of the final engagement file is ordinarily not more than 60 days after the date of the assurance report¹⁹.

A206. The completion of the assembly of the final engagement file after the date of the assurance report is an administrative process that does not involve the performance of new procedures or the drawing of new conclusions. Changes may, however, be made to the documentation during the final assembly process if they are administrative in nature. Examples of such changes include:

• Deleting or discarding superseded documentation.

• Sorting, collating and cross-referencing working papers.

• Signing off on completion checklists relating to the file assembly process.

• Documenting evidence that the assurance practitioner has obtained, discussed and agreed with the relevant members of the engagement team before the date of the assurance report.

A207. Professional and Ethical Standard 3 requires firms to establish a quality objective that addresses the maintenance and retention of engagement documentation to meet the needs of the firm and comply with law, regulation, relevant ethical requirements, or professional standards.²⁰ The retention period for assurance engagements ordinarily is no shorter than five years from the date of the assurance report.²¹