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PROFESSIONAL ISSUES

Jones explains each service would have a reasonable basis for making
its assertion.
to help Key decide which ited rather than reasonable assurance. Jones would
Jones would perform procedures to obtain lim-
conclude whether she was aware of any material
service to use. modifications that should be made to:
■
Key’s policies in order for them to be in ac-
cordance with the specified regulations; or
■ Key’s assertion in order for it to be fairly stated.
In a review, the nature and extent of procedures
Key’s management believes that the intended users are less than in an examination.
will find value in the report without agreeing to
the procedures performed, there is no need for Key DECISION TIME
to communicate with the intended users. If Jones’s Since Key’s management does not have a reasonable
report does not contain an alert restricting its use, it basis to provide an assertion, it cannot receive an
is intended for general use, and users need not have assertion-based examination or review. Ultimately,
agreed to the procedures. Key’s management asked Jones to provide an AUP
Concerned that, while regulators might agree to engagement and to issue a general-use report. As
the agreed-upon procedures, customers will want Key grows, it plans to enhance its procedures to be
additional comfort about Key’s compliance, Key able to provide an assertion with a reasonable basis
wants to consider services that provide an opinion or and thus engage Jones to perform an assertion-
a conclusion by Jones. based examination of compliance with regulations.

ASSERTION-BASED ENGAGEMENT (AT-C SECTION 205) CHOOSING THE APPROPRIATE SERVICE
In an assertion-based examination engagement, Key We have summarized the decision-making
should provide an assertion and would have a reason- process for attestation services. The first decision is
able basis for making its assertion. Jones would obtain whether the engaging party primarily wants advice
reasonable assurance about whether the subject matter or assurance. If a client believes that it needs help
is in accordance with (or based on) the criteria, in all to design or improve its procedures, the CPA can
material respects, or whether an assertion about the offer a consulting service. Although the practi-
subject matter is fairly stated, in all material respects. tioner may provide advice as a byproduct of an
In this engagement, besides the steps that apply attestation engagement, it is not the engagement’s
to all attestation engagements, Jones should: primary purpose.
■ Obtain management’s assertion about whether In deciding which attestation service should be
Key complied with specified laws, regulations, performed, the engaging party (which is usually
rules, contracts, or grants and determine whether the responsible party) should determine whether
Key has a reasonable basis for its assertion. it has a reasonable basis for, and will provide, an
■ Identify and assess the risks of material misstate- assertion. What constitutes a reasonable basis for
ment, whether due to fraud or error, based on the responsible party’s assertion depends on the
an understanding of Key’s policies; the specified nature of the subject matter and other engagement
regulations; the evaluation of whether the poli- circumstances. In some cases, a formal process
cies are in accordance with the regulations; and with extensive internal control may be needed to
other circumstances. provide the responsible party with a reasonable
■ Obtain sufficient appropriate evidence about basis for making its assertion. The fact that the
whether material misstatements exist by design- practitioner will report on the subject matter is
ing and implementing appropriate responses to not a substitute for the responsible party’s own
the assessed risks. processes to have a reasonable basis for its asser-
■ Issue a report that provides Jones’s opinion as to tion. The practitioner and engaging party should
whether Key’s policies are in accordance with the next consider (1) whether, because of the subject
specified regulations. matter, the standards prohibit the practitioner
from performing a review or direct examination;
REVIEW (AT-C SECTION 210) (2) what services best meet the report users’ needs;
In a review, Key should provide an assertion and and (3) the costs. ■

10 | Journal of Accountancy July 2022