Week 2 - Limitations of Assurance

Question 1

What is the first limitation of assurance?

Answer 1

We cannot give a complete assurance - we only do sample testing etc

Question 2

What is the second limitation of assurance?

Answer 2

There are some subjective judgements

Question 3

What is the third limitation of assurance?

Answer 3

The financial statements are not current - historic in nature

Question 4

What is the fourth limitation of assurance?

Answer 4

Historic cost basis - assets being worth more/less than when they were originally purchased

Question 5

What is the fifth limitation of assurance?

Answer 5

Do not oversee the building of financial statements

Question 6

What is the sixth limitation of assurance?

Answer 6

Only visiting client periodically, unlike internal auditors

Question 7

What is the seventh limitation of assurance?

Answer 7

Reliance on systems - inherent limitations
We rely on the information from these systems and might not notice this error

Question 8

What is the eighth limitation of assurance?

Answer 8

We don’t give 100% conclusion on our findings - persuasive rather than conclusive evidence

Question 9

What is the ninth limitation of assurance?

Answer 9

Collusion between client staff - harder to discover fraud taking place

Question 10

What is the tenth limitation of assurance?

Answer 10

Reliance placed on client where info cannot be verified - e.g verbal

Question 11

What is the eleventh limitation of assurance?

Answer 11

Use of estimates by client