Reasonable assurance and limited assurance

Auditing and Assurance Revision Questions and Answers

Answer:
Reasonable Assurance and Limited Assurance
Reasonable Assurance is a concept relating to the accumulation of the audit evidence necessary for the auditor to conclude that there are no material misstatements in the financial statements taken as a whole. An audit in accordance with Nepal Standards on Auditing is designed to provide reasonable assurance that the financial statements taken as a whole are free from material misstatement. Audit cannot give an absolute assurance due to certain inherent limitations that affect the ability of detect material misstatement which may arise generally due to use of testing, limitation of accounting and control system and mostly due to the fact that audit evidence is persuasive rather than conclusive.
The objective of a reasonable assurance engagement is a reduction in assurance engagement risk to an acceptably low level in the circumstances of the engagement as the basis for a positive form of expression of the practitioner‟s conclusion. In other words, the practitioner expresses conclusion in the positive form.

The objective of a limited assurance engagement is a reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement, as the basis for a negative form of expression of the practitioner‟s conclusion. In other words, the practitioner expresses conclusion in the negative form.



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