CPA Exam — AUDForming Conclusions and ReportingEasy
A CPA is performing a review engagement of a non-public entity's financial statements. Which of the following statements is true regarding the assurance provided in a review engagement?
- AThe CPA provides a limited level of assurance.
- BThe CPA provides no assurance.
- CThe CPA provides a high level of assurance.
- DThe CPA provides a reasonable level of assurance.
Show answer & explanationAnswer & explanation
Correct answer: A. The CPA provides a limited level of assurance.
A review engagement provides a limited level of assurance, expressed in the form of negative assurance, indicating that the CPA is not aware of any material modifications that should be made to the financial statements.
Why the other options are wrong
- B. No assurance is provided in a compilation or agreed-upon procedures engagement.
- C. High assurance is provided in an examination engagement (audit).
- D. Reasonable assurance is provided in an audit engagement.
Limited Assurance (Review)
The level of assurance provided in a review engagement, which is less than reasonable assurance but higher than no assurance, expressed as negative assurance.
- Less extensive than an audit.
- Expressed as negative assurance ('not aware of any material modifications').
- Primarily involves inquiry and analytical procedures.
Memory trick: ARE You Sure? (Agreed, Review, Examination)