Examples of Reasonable assurance in a sentence
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Sri Lanka Auditing Standards will always detect a material misstatement when it exists.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs [UK] will always detect a material misstatement when it exists.
More Definitions of Reasonable assurance
This is the deduction that financial reports aren’t materially misstated. It is a high-level guarantee but no guarantee. It includes the understanding that there is a remote likelihood that material misstatements will not be detected or prevented on time. Reasonable assurance is the assurance level auditors are required to acquire by the execution of audit procedures and to
assess the resultant audit evidence when conveying a judgment that GAAP fairly presents the financial reports. Reasonable assurance refers to the degree of satisfaction of the auditor that the evidence acquired during auditing backs the declarations embodied in the financial reports. Reasonable assurance is important because it gives directions on the valuations of the soundness and dependability of the financial reports by auditors. It also shows the efficiency of internal
control by the firms’ management and audits done internally by internal auditors. Reasonable assurance also helps to determine negligence and liability of the auditor. Auditors cannot achieve absolute assurance because of the various factors that limit and hinder the auditing process. Factors affecting reasonable assurance
are: These factors restrict the auditor to obtain an absolute assurance level.
Audit evidence:
It is information and facts obtained by the auditor from sources under his own control, from the organizations’ heads, and to a large extent from 3rd parties, which is useful, reliable, and sufficient enough as a basis of forming an opinion on the true and fair view.
Audit evidence sources are:
- underlying records and documents
- Systems and controls in place
- Employees of the firm and those managing it
- Assets. These should be tangible such as buildings, stock, or land
- From stakeholders of the business, for example, the suppliers
Audit evidence types are;
1] Primary evidence
It originates from within the clients’ entity e.g. from the management, records, and documents. This evidence is obtained through the following techniques
- Through observation
- Through inquiry
- Through physical inspection
- Through computation
- Through analytical review procedures
2] Secondary evidence
It originates from outside the clients’ firm. This evidence is normally obtained through 3rd confirmation where the auditor requests them through a written document to approve directly to him, e.g., debtor’s circularization.
3] Circumstantial audit evidence
It is acquired from the procedures of activities of the client where the auditor observes the events as they unfold in the client’s entity, e.g., observing stock take or cash count.
4] Oral /hearsay evidence
This refers to the evidence obtained during discussions and interviews with employees and staff of the firm being audited. The evidence is not documented because of its oral nature.
Qualities of good audit evidence
For the audit evidence to meet the criteria of quality, it must have the following characteristics
- Sufficiency
- Relevance
- Reliability
Sufficiency of audit evidence
It refers to the quantitative measure of audit evidence credited to evidence that comes from various sources and enables auditors to remove the element of doubt.
Facts that influence the sufficiency of audit evidence.
1. The materiality of the items
If items are material more evidence is gathered to ensure there is no omission or misstatement
2. Auditor risk assessment
Where the auditor assesses the risk behind more evidence is gathered to minimize risk exposure
3. Audit objective
The objective is to detect fraud and errors, more evidence is gathered, but if it is to prove a real and fair view, less evidence is gathered.
Reliability of audit evidence
It is the credibility or the appropriateness of the evidence. It is the level of confidence that a given source of evidence can give the auditor.
The Measures used to evaluate the dependability of audit evidence are;
- Evidence from internal sources is not as reliable as that from external sources because it is not subjected to manipulation.
- Evidence obtained from the auditor himself is more dependable than evidence obtained from 3rd party.
- Evidence that is documentary-supported is more dependable than oral /hearsay.
- Evidence from sources within the firm is more dependable where the internal controls are effectively operational.