CPA Exam — AUDForming Conclusions and ReportingEasy
An auditor is engaged to perform an examination of management's assertion about an entity's compliance with specified contractual provisions. Which of the following levels of assurance is typically provided in an examination engagement?
- AAbsolute assurance
- BNo assurance
- CLimited assurance
- DReasonable assurance
Show answer & explanationAnswer & explanation
Correct answer: D. Reasonable assurance
An examination engagement is designed to provide reasonable assurance. This is the highest level of assurance provided in attestation engagements, falling short of absolute assurance, which is generally not attainable.
Why the other options are wrong
- A. Absolute assurance is generally not attainable in any audit or attestation engagement due to inherent limitations.
- B. No assurance is provided in compilation engagements, which are not attestation engagements.
- C. Limited assurance is provided in review engagements, not examinations.
Examination Assurance
An examination engagement provides reasonable assurance, the highest level of assurance expressed in attestation engagements.
- Highest level of assurance in attestation
- Requires extensive procedures
- Results in an opinion
Memory trick: Examine for Reason, Review for Limit, Compile for None.