Chapter 1: Intro to assurance services

Question 1

Limited Assurance [3]

Answer 1

1. It is a moderate level of assurance
2. expressed in negative form of conclusion
3. usually given in review of historical financial statements, or review of cash flow forecast.

Based on our review, nothing has come to our attention that causes us to believe that accompanying financial statements do not give true and fair view in accordance with IFRSs.

Question 2

Reasonable Assurance [3]

Answer 2

1. It is a high, but not absolute, level of assurance
2. expressed in positive form of conclusion
3. usually given in an audit of historical financial statements

In our opinion, financial statements give true and fair view of financial position of ABC Limited at December 31, 20X1 and its financial performance and cash flow for the year then ended in accordance with IFRS.

Question 3

Absolute Assurance

Answer 3

means certification or guarantee that financial statements are free from all misstatements.

Question 4

Inherent limitations of audit

Why can’t an auditor provide absolute assurance?

Answer 4

1. Nature of F/S [estimates, judgements, uncertainities]
2. Nature of procedures, [scope limitation by management, no legal powers, fraud/collusion/complex technique]
3. Time and cost limitation
4. Based on (faulty) auditor’s judgement
5. inherent limitations in client’s internal control system
6. Staff may not be able to answer everything (due to reasonable and non reasonable justifications)