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Question 2

What are inherent limitations of audit? (or why absolute assurance cannot be provided)

[Chapter 1]

Answer 2

1. Nature of financial statements (estimates, judgments and uncertainties are involved).
2. Nature of audit procedures
   (a) Management may not provide complete information to auditor.
   (b) Auditor does not have legal powers.
   (c) Fraud involving collusion and complex techniques.
3. Time and Cost limitation.
4. Many of the audit procedures are based on auditor’s judgment, which may be faulty.
5. inherent limitations in internal control system.
6. Company’s staff may not be available.

Question 3

What are inherent limitations of audit? (or why absolute assurance cannot be provided)

[Chapter 1]

Answer 3

1. Nature of financial statements (estimates, judgments and uncertainties are involved).
2. Nature of audit procedures
   (a) Management may not provide complete information to auditor.
   (b) Auditor does not have legal powers.
   (c) Fraud involving collusion and complex techniques.
3. Time and Cost limitation.
4. Many of the audit procedures are based on auditor’s judgment, which may be faulty.
5. inherent limitations in internal control system.
6. Company’s staff may not be available.

Question 4

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Answer 4

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