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ACCA Strategic Professional · Advanced Audit and Assurance (International) · Audit-related and assurance services

A practitioner is asked to perform an engagement on a client's quarterly cash-flow forecast. The client wants a conclusion worded as: 'Nothing has come to our attention that causes us to believe the forecast is not reasonably prepared.' The practitioner plans mainly enquiry and analytical procedures. Which statement correctly describes this engagement?

This is a limited assurance engagement. The negative-form conclusion and reliance on enquiry and analytical procedures mean assurance risk is reduced to an acceptable level, though higher than in reasonable assurance. Reasonable assurance would require a positive opinion with more extensive evidence, and agreed-upon procedures give no conclusion.

  1. AIt is a reasonable assurance engagement, because the conclusion is in negative form
  2. BIt is a limited assurance engagement, with risk reduced to a level acceptable but greater than in reasonable assuranceCorrect
  3. CIt is not an assurance engagement, because enquiry and analytical procedures are not evidence
  4. DIt is an agreed-upon procedures engagement, because the conclusion is negative

Explanation

A negative-form conclusion supported mainly by enquiry and analytical procedures is characteristic of limited assurance, where risk is reduced to an acceptable level but higher than for reasonable assurance. Reasonable assurance uses a positive-form opinion. Agreed-upon procedures give findings without any assurance conclusion.

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