CPA Exam — AUDForming Conclusions and ReportingMedium
A CPA is engaged to perform an examination of management's assertion about an entity's compliance with specified requirements. Which of the following levels of assurance is provided in this type of engagement?
- ALimited assurance
- BPositive assurance
- CNegative assurance
- DNo assurance
Show answer & explanationAnswer & explanation
Correct answer: B. Positive assurance
An examination engagement is designed to provide a high, but not absolute, level of assurance, expressed as positive assurance, that the subject matter is free from material misstatement. This contrasts with review engagements (limited assurance) or compilation engagements (no assurance).
Why the other options are wrong
- A. Limited assurance is provided in a review engagement, which is a lower level of assurance than an examination.
- C. Negative assurance is a form of limited assurance, typically expressed in review reports, not examination reports.
- D. No assurance is typically provided in a compilation engagement, not an examination.
Positive Assurance
Positive assurance is a high, but not absolute, level of assurance provided in an examination engagement, where the practitioner expresses an opinion on the subject matter.
- Highest level of assurance in attestation engagements.
- Expressed as an explicit opinion (e.g., 'In our opinion...').
- Requires extensive procedures and evidence gathering.
Memory trick: Examine Positively, Review Limiting, Compile None.