
Understanding Assurance Services for Trustees: A Guide to Good Governance
As Trustees of Trusts, ensuring robust governance and transparency is a cornerstone of your fiduciary responsibilities. While statutory audits may not always be required for Trusts or their associated companies, engaging in professional assurance services can add significant value, foster stakeholder confidence, and enhance your decision-making. This article explores the different types of assurance services available and how they can support trustees in achieving good governance.
A full audit provides the highest level of assurance and is conducted in accordance with internationally recognised frameworks such as the International Standards on Auditing (ISA UK). An audit involves an independent examination of financial statements to express an opinion on whether they present a true and fair view in accordance with the applicable financial reporting framework.
Use Case: Trusts with Complex Financial Structures
For trusts with substantial assets, multiple beneficiaries, or complex investment portfolios, a full audit can provide a detailed understanding of the financial health of the trust structure. This level of assurance is ideal where external stakeholders, such as banks or regulators, require a high degree of confidence in the financial information.
Benefits:
- Enhances credibility and trust with beneficiaries and third parties.
- Identifies potential risks and weaknesses in internal controls.
- Supports compliance with regulatory requirements where applicable.
Assurance Review Engagements, such as a review of historical financial statements, focuses on evaluating the accuracy and completeness of past financial data. These are conducted under frameworks such as the International Standard on Review Engagements (ISRE) 2400 or ISRE 2410 for interim financial information. The procedures are less extensive than a full audit, focusing on analytical procedures and inquiries.
Use Case: Trustees Seeking Oversight Without Full Audit Costs
For trusts that do not legally require an audit but still want a professional review of financial information or when trustees changes, a assurance review engagement can serve as a cost-effective alternative to an audit. It’s particularly suitable for entities with simpler financial structures or where trustees want to ensure that financial statements are free from material misstatements.
Benefits:
- Offers a professional report on financial statements at a lower cost than a full audit.
- Improves transparency and governance.
- Supports trustees in making informed financial decisions.
An Agreed-Upon Procedures engagement involves specific procedures agreed upon between the trustee and the service provider, performed under ISRS 4400. No opinion is expressed, and the report states the factual findings. For an entity which has no external requirement for an audit an agreed-upon procedures over specific risks in financial or non-financial information can be a cost-effective way of obtaining comfort.
Use Case: Transaction Verification or Beneficiary Reporting
Trustees may require verification of specific transactions, such as large distributions or asset valuations or material aspects of the financial statements, to confirm compliance with trust agreements or to ensure accurate beneficiary reporting. AUP engagements are tailored to these precise needs, providing flexibility and focus.
Benefits:
- Tailored to address specific concerns of trustees.
- Provides factual, unbiased results to support decision-making.
- Cost-effective for narrow-scope reviews.
A reasonable or limited assurance engagement, such as a compliance review or specified procedures, provides a level of assurance, as appropriate, that the subject matter information is free from material misstatement. It is performed under standards like the International Standard on Assurance Engagements (ISAE) 3000, which applies to a variety of non-financial information engagements, including sustainability reporting, internal controls reviews or specific reviews of financial information.
Use Case: Ensuring Compliance with Specific Regulations
For trusts involved in regulated activities, a reasonable or limited assurance review can verify compliance with relevant laws, trust deeds, or investment policies. It is also useful for monitoring adherence to ethical or environmental standards, which may be critical for charitable trusts.
Benefits:
- Provides a focused examination of specific areas of concern.
- Offers insights into areas of non-compliance or improvement.
- Demonstrates proactive governance to stakeholders.
Why Trustees Should Engage in Assurance Services
Professional assurance services are more than just compliance exercises; they are tools for strengthening governance, building trust, and making informed decisions. Whether through a full audit or a tailored AUP engagement, trustees can demonstrate their commitment to transparency and fiduciary excellence.
By aligning assurance engagements with the unique needs of the trust, trustees can proactively address risks, improve financial reporting quality, and safeguard the interests of beneficiaries. While statutory requirements may not mandate such reviews, their value in fostering good governance cannot be overstated.
Baker Tilly Channel Islands is experienced in providing such engagements and we welcome the opportunity to discuss how we can assist and provide the best level of assurance.
