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

Brightwell LLP is engaged to report on the effectiveness of Orchid Ltd's internal controls over financial reporting. Orchid's directors say the engagement should be a reasonable assurance engagement but want the practitioner to only perform enquiry and analytical procedures. Which statement best reflects the assurance framework?

Reasonable assurance needs sufficient appropriate evidence to reduce engagement risk to an acceptably low level. Enquiry and analytical procedures alone would normally not achieve this, and the directors' agreement does not change that. Absolute assurance is not attainable, and limited assurance involves less work.

  1. AEnquiry and analytics alone are enough if the directors agree to the scope
  2. BReasonable assurance requires sufficient appropriate evidence to reduce engagement risk to an acceptably low level, so enquiry and analytics alone would normally be inadequateCorrect
  3. CReasonable assurance means absolute assurance, so all controls must be tested
  4. DLimited assurance requires more evidence than reasonable assurance

Explanation

Reasonable assurance requires the practitioner to obtain sufficient appropriate evidence to reduce engagement risk to an acceptably low level, which normally needs tests beyond enquiry and analytics. Management cannot restrict scope so that this is not met. It is not absolute assurance, which is unattainable, and limited assurance needs less evidence, not more.

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