- 10 Marks
Question
According to IAASB Handbook 2023-2024 edition, the degree of assurance that can be provided about the reliability of the financial statements of a company will depend on the amount of work performed in carrying out the assurance process and the result of that work. The resulting assurance falls into one of two levels – reasonable assurance and limited assurance.
Required:
In reference to the statement above, discuss the difference between reasonable assurance and limited assurance.
Answer
Levels of Assurance Engagements
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Reasonable Assurance:
- This is the highest level of assurance that can be provided by a practitioner.
- It involves a comprehensive examination of the subject matter and aims to provide a high level of confidence that the information is free from material misstatement.
- The practitioner conducts extensive procedures, including detailed testing and analysis.
- This typically involves substantive procedures and evidence gathering to a significant extent.
- The nature of work includes a thorough review of internal controls, transactions, and other relevant information.
- Example of instances where reasonable assurance is given: Audit Engagements.
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Limited Assurance:
- Provides a moderate level of confidence that the information is free from material misstatement, but it is less comprehensive than reasonable assurance.
- The procedures performed are less extensive and are designed to provide a lower level of assurance.
- Example of instances where limited assurance is given: Review Engagements.
- Tags: Assurance, Audit, Financial Statements, IAASB, Limited Assurance, Reasonable Assurance, Risk Assessment
- Level: Level 2
- Topic: Nature and scope of audit and assurance evidence
- Series: Nov 2024
- Uploader: Salamat Hamid