During planning, an audit lead must decide whether an upcoming procurement engagement is assurance or advisory. Which statement correctly distinguishes the two engagement types?
- AIn an assurance engagement the auditor advises management and management remains free to reject the recommendations offered.
- BAn assurance engagement involves a three-party relationship and an objective assessment against criteria, while advisory work is directed by the client to add value. Correct
- CIn an advisory engagement the auditor issues an independent opinion to third parties on the adequacy of the control environment.
- DBoth engagement types require the auditor to design and then implement the controls that management will later operate.
Why A is wrong: This is tempting because advice is common in audit work, but it describes advisory work; assurance involves an independent assessment against criteria, not optional advice.
Why B is correct: Correct because assurance rests on a process owner, an assessor, and a user, tested against defined criteria, whereas advisory scope and nature are agreed with the client.
Why C is wrong: This sounds authoritative, but issuing an independent opinion to reliant parties is the hallmark of assurance, not advisory work, which is client-directed counsel.
Why D is wrong: This is plausible because auditors advise on control gaps, but designing and implementing controls destroys independence; management owns and builds its own controls.