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Hi Kim,
1. just to confirm for historically performed(like financial statement of client) can be given both reasonable and limited assurance and provide appropriate opinion right ?
2. for prospective financial information, why only limited assurance review can be given ? is it because it’s based on future not historic ?
3. in the AAA syllabus and study guide, there are 5 level of assurance which are reasonable, high, moderate, limited and negative
Can i understand reasonable and high as “reasonable assurance” and moderate, limited and negative as “limited assurance” ?
Thank you Kim
1. Yes – audit for reasonable assurance and review for limited assurance
2. Yes
3. Hmmm – they are really 5 terms used in describing levels of assurance rather than 5 levels:
The highest level of assurance is “reasonable assurance” – can be provided by nothing less than an audit and is expressed in a “positive” form.
Anything less than an audit can give, at best, only limited assurance (because scope/procedures are limited). This is expressed in a “negative” form.PFI is interesting – because actual results are likely to differ, if information is expressed as a range of outcomes, the professional accountant would go NO assurance that actual results will fall within the range. (A Type I report for controls at a service organisation gives NO assurance about the operation of controls.)
There is only one example of a moderate level of assurance in IAASB’s pronouncements – when reporting on the reasonableness of management’s assumptions.
3. but for the sake of AAA (P7) paper, is it important to classify and understand all of these 5 terms ?
may i understand reasonable and high level of assurance is like external audit
and
moderate, limited and negative assurance is for PFI ?
4. in addition, may i know what is the difference between no assurance and negative assurance ? because no assuance is given for forensic accounting but im not sure whether it’s considered as negative assurance
3. Yes – I thought that was what I was saying:
Audit -> audit procedures -> reasonable assurance – expressed positively
Review (say) -> limited procedures -> limited assurance – expressed negativelyThis is all summarised on page 9 of our notes – together with an explanation of negative.
I found some other references to “moderate” level of assurance as the level of assurance associated with a limited assurance engagement. So moderate just means less than reasonable (clearly limited) and will also be expressed negatively.
No assurance means its not an assurance engagement – see page 8 for five elements of an assurance engagement if you’ve forgotten.
So preparing tax returns for a client is an engagement – but it’s not an assurance engagement – the professional accountant won’t express an opinion or conclusion on the tax liability he calculates (!) A forensic assignment to provide a report on the cost of inventory lost in a fire for an insurance claim doesn’t have an opinion or conclusion – it reports factual findings. It is up to the recipient to draw their own conclusions.
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