Assurance Services Are a Growth Area

Mohamed E. Hussein

BOOKS REVIEWED:

Buckless, Frank A., Mark S.Beasley, Steven M. Glover,and Douglas F. Prawitt. 2000.Auditing Cases (Upper SaddleRiver, NJ: Prentice-Hall).

Solomon, Ira, and Mark E.Peecher. 2000.Assurance Services: AnIntroduction and Applications,2nd ed. (Cincinnati, OH:South-Western CollegePublishing).

Many CPAs watching theAcademy Awards, andhearing the announce-

ment that the vote tabulationswere certified by such and suchaccounting firm, probablynever thought that such servic-es will become an importantsource of nonfinancial auditengagements. A few years ago,auditing seemed to be a stag-nant, if not a declining, busi-ness. The consolidation inmany industries through merg-ers and acquisitions hasreduced the number of largepublicly traded companies.

Furthermore, auditing is per-ceived to be a commoditywhere the audit fee is seen asthe primary competitive factor.

This is changing as a resultof the demand for CPAs to pro-vide other types of assuranceservices. While assurance serv-ices encompass more thanfinancial audits, they are basedon the same premises of inde-pendence and professionaljudgment. The definition by theAmerican Institute of CertifiedPublic Accountants (AICPA)Special Committee onAssurance Services:“Assurance Services are inde-pendent professional servicesthat improve the quality ofinformation, or its context, fordecision makers.” The increas-ing demand for assurance serv-ices may be attributed tochanges in the business envi-ronment and the pervasive useof technology. Solomon andPeecher reported examples ofassurance services by CPAsthat range from the certifica-tion of the vote tabulation atthe Academy Awards to provid-

ing assurance that golf ballsperform according to the manu-facturer’s claims or verifyingOnsale, a Web-based firm,which asserts that it resellsproducts at cost.

To provide these assuranceservices, CPAs require a betterunderstanding of businessprocesses and technologytrends. In addition to thechanges in the overall account-ing curriculum, the auditcourse has been changed inmany schools to cover thewhole area of assurance servic-es. This requires instructionalresources that can train stu-dents to deal with complex sit-uations and the ever-changingworld of technology. Cases andtechnology-based exercises aresuch instructional methods.These two texts offer both ofthese methods.

AUDITING CASES

Buckless et al. state thatthe motivation for the book isthe call by academics and prac-titioners for an increasedemphasis on the development

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69© 2001 John Wiley & Sons, Inc.

of students with critical think-ing, communication, and inter-personal relationship skills.They believed that these skillswould require more activerather than passive learning.One approach to such activelearning, they believed, is thecase-based method. Hence, theobjective of the book “was todevelop course materials thatwould provide students hands-on exposure to realistic casesinvolving all aspects of theaudit process.” The book has 28cases. Many of the cases arebased on actual companies,some of which were engaged infinancial reporting fraud. Someof the cases are based on somecelebrated fraud cases, such asPhar-Mor, Inc., and CendantCorporation. Other cases areabout well-known companies,such as Dell ComputerCorporation and theJacksonville Jaguars FootballTeam. While some of the casesaddress more than one issue,most of them can be used tofocus on a single issue. Theissues covered by the casesinclude assurance service con-cerning the use of technology,professional roles and profes-sional ethical questions, inter-nal control, risk assessment,first time engagements, andaudit procedures.

The cases are well writtenand very engaging. They rangein length from one and a halfpages to 20 pages. Some of the

cases have extensive anddetailed data. The book can beused as a supplementary text inan undergraduateassurance/audit course or in acontinuing professional trainingcourse. The book comes withan instructor’s resource manual.

ASSURANCE SERVICES: ANINTRODUCTION ANDAPPLICATIONS

The Solomon and Peechertext comes in a CD-ROM thathas two main parts: (1) anintroductory chapter on thenature of and market for newand exciting assurance servicesand (2) a background case andeight interactive assurance-services projects related to afictitious organization calledDave’s Dating Service. Thecontents of the CD-ROM arebest viewed with NetscapeNavigator or Microsoft InternetExplorer. This enables the read-er to access several hyperlinksthat are included.

The introductory chapterhighlights the different typesof assurance services and dis-cusses the economic andnoneconomic factors behindthe growth in those services. Itaddresses the importance ofindependence of assuranceproviders and discusses theconcepts regarding the acqui-sition and use of evidencewithin assurance services.Several attestation examples

are provided. Finally, end-of-chapter questions and mini-cases are included.

The rest of the CD-ROM isdivided into Dave’s DatingService (DDS) Case,Supporting Documents,Database, and Projects. First,the Dave’s Dating Service Caseprovides the background infor-mation. The SupportingDocuments constitute eviden-tiary matter in support of thespecific client profiles thatcomprise the dating service’sclient database. The Databaseis in a spreadsheet format, andit contains the client profiles onwhich will be the focus of mostof the attestation and assuranceprocedures. A Microsoft Excel-based simulation tool can beused to simulate the process ofconfirming certain characteris-tics of DDS’s clients directlywith an independent, third-party organization namedSecure, Incorporated. Finally,there are eight assurance-serv-ice projects that cover all com-ponents of an assuranceengagement.

The material is welldesigned and easy to follow. Itprovides students or traineeswith a realistic case andenables them to develop analyt-ical skills using computer andInternet-based tools. The mate-rials can be used in an assur-ance course at the undergradu-ate or graduate level, as well asin professional training.

70 The Journal of Corporate Accounting & Finance

© 2001 John Wiley & Sons, Inc.

Mohamed E. Hussein, Ph.D., is professor of accounting at the University of Connecticut (UConn) at Storrs,Connecticut. Dr. Hussein has taught in UConn’s undergraduate, MBA, EMBA, and doctoral programs. Hehas served as resident director of UConn’s Program in European Studies at the University of Maastricht,The Netherlands, and was the Andersen Consulting Faculty Fellow at the University of Connecticut. Dr.Hussein’s research has been published in a variety of professional and business journals.