Audit and Assurance Practice Exam 2025 – The Complete All-in-One Guide for Exam Success!

The statement that audits provide reasonable assurance while reviews provide limited assurance accurately captures the fundamental difference between these two types of assurance engagements.

In an audit, the auditor conducts a comprehensive examination of financial statements and underlying records, applying rigorous procedures to gather sufficient appropriate evidence. This process allows auditors to express an opinion that the financial statements are free from material misstatement, thereby providing reasonable assurance to users about their reliability. The nature of the audit involves extensive testing and verification processes designed to reduce the risk of undetected errors or fraud to an acceptably low level.

On the other hand, a review is less intensive and is focused on analytical procedures and inquiries. The objective of a review is to determine whether any material modifications should be made to the financial statements for them to be in conformity with applicable accounting standards. This results in limited assurance, as the procedures performed are more superficial compared to those in an audit, leading to a conclusion that is not as robust.

This fundamental distinction between levels of assurance is critical for stakeholders relying on these financial reports, as it dictates the level of confidence they can place in the information presented.