What is the difference between Attestation engagement and Direct reporting engagement in auditing?


Before we discuss the difference between attestation engagement and direct reporting engagement, lets understand what is assurance engagement at first place.

Assurance engagement is simply an engagement conducted by a practitioner at the end of which he expresses his opinion on the measurement of subject matter against a criteria. This opinion will ultimately enhance the degree of confidence of the intended users about the measurement of subject mater (outcome of evaluation) i.e. whether the measurement (evaluation) given is fair or not which in turn increases the credibility of subject matter.

Here understanding the link between criteria, subject matter and measurement of subject matter is of crucial importance which is:

measurement of subject matter is an information which  is obtained by applying a criteria to a subject matter

Measurement of subject matter is also called subject matter information. As both terms mean one and the same thing therefore, from this point forward, measurement of subject matter and subject matter information will be used interchangeably in this answer.

Now if we replace the formal terms in the definition above with common examples then we can easily understand what this definition is all about. That is:

  • Responsible party = For example management
  • Subject matter = It is the entity’s actual financial position, financial performance and changes in cash flows about which users are interested. And if you have information about these three areas then you are in a much better position take economic decisions regarding entity. Therefore, the three aspects are in short called subject matter.
  • Criteria = For example International Accounting Standards (IASs) or International Financial Reporting Standards (IFRSs), Local Accounting Standards and any other specific accounting framework that is in use for the preparation of financial statements in a particular jurisdiction or anything to be used as a benchmark.
  • Subject matter information = In its true terms it is the information obtained as a result of evaluation of subject matter i.e. in simple words the financial statements. It is the financial statements which provide evaluation of entity’s financial position, financial performance and changes in cash flows. And this evaluation is conducted by management by applying financial reporting framework (criteria) on the subject matter i.e. financial position, performance and changes in cash flows of the entity.
  • Practitioner = For example; auditor, reviewer etc. [Remember, the term practitioner is much broader then “auditor”]
  • Users = all those people, other than responsible party, who seek assurance of practitioner about the measurement of subject matter as given by the responsible party.

In other words we can say that users, who have asked for the help of a practitioner, are not just interested in the subject matter but more importantly they want to be confident whether the subject matter information, which makes the subject matter relevant and reliable, is appropriate or not.

To sum this all up and to understand it more consider the following example.

Management (responsible party) of company A fulfilled its responsibility by publishing financial statements (subject matter) in accordance with International Financial Reporting Standards (criteria) and the assets, liabilities etc are recognized, measured, presented and disclosed (subject matter information) as per the requirements of IFRSs.

Practitioner (auditor) is appointed by the shareholders (users) to express his opinion (assurance) in the form of a report over the recognition, measurement, presentation and disclosures (subject matter information) made by the management (responsible party) in the financial statements (subject matter) are actually in accordance with IFRSs (criteria)

If we are clear about the concept of assurance engagement itself, now we can understand what are attestation engagements and direct reporting engagements.

If the measurement of subject matter is given by the responsible party, it takes the form of assertions if it is disclosed to the intended users and then practitioner is asked to affirm such assertions of the responsible party. Such assurance engagement is attestation engagement. Another name for attestation engagement is assertion-based engagement as practitioner express his opinion about assertions fairness.

However, if the practitioner performs the measurement of subject matter himself OR obtains the representation from the responsible party who has conducted the measurement of subject matter where such evaluation was not disclosed to intended users by the responsible party then measurement of subject matter will be provided by the practitioner in his assurance report to intended users. Such engagements are called direct reporting engagements.

Do not confuse attestation engagements and direct reporting engagements with reasonable assurance engagement and limited assurance engagements. All four are studied under assurance engagements. But the dimensions are different just like when we try to classify “cost” we are able to classify the same thing in different ways just because we look at it from different perspectives.

Same way, if we talk about assurance engagement from the perspective of degree of assurance we get two types; reasonable assurance engagements and limited assurance engagements. Whereas if we look at assurance engagements from the perspective of what forms assurance engagement can take then we get attestation engagement and direct reporting engagements.

Recommended readings:

  1. What is an Assurance engagement?
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Teaching professional business subjects to the students of FIA, ACCA, CIMA, CA etc. He also found ACCA LIVE which is Pakistan's first portal to provide online classes and distance learning solutions to FIA/ACCA students. At PakAccountants.com he is busy making study material for different qualifications. Beside writing articles he answers questions asked using ASK TUTOR!


  1. Sir, can an audit engagement be called as assertion based engagement? If so, in an audit engagement we obtain written representations from management. So can it be called as an both assertion based and direct reporting engagement? Sir, in an assertion based engagement also, practitioner performs the measurement of subject matter by checking assertions. Is checking assertions is different from measurement of subject matter because assertions include checking presentation and disclosure. Mainly what is the difference between a practitioner and an auditor ? May you made me simple by giving a simple example sir?