The objective of an assurance engagement is to obtain sufficient appropriate evidence to express a conclusion, providing reasonable or limited assurance, as to whether the audited body has complied with the specified requirements of the appropriate legislation (the ‘criteria’) in all material respects.
The higher the level of assurance provided, the greater the confidence the individual can place in the matter being assured. However, for an audit team leader to provide a higher level of assurance, they need to reduce the risk that a material misstatement exists in the matter being audited. The audit team leader achieves this by conducting a more in-depth and rigorous assessment of the matter being audited.
Absolute assurance means that there is no assurance risk. Reducing assurance risk to zero is very rarely attainable or cost beneficial; primarily because the evidence available to an audit team leader is persuasive rather than conclusive, and audit team leaders are required to use judgement in gathering and evaluating assurance evidence. As such, absolute assurance is not part of the NGER Audit Determination.
The NGER Audit Determination’s definition of a reasonable assurance engagement is as follows: 'A reasonable assurance engagement means an assurance engagement in which the audit team leader gives an opinion, expressed as a reasonable assurance conclusion, if appropriate in the circumstances of the engagement'.
Because the level of assurance obtained in a limited assurance engagement is lower than in a reasonable assurance engagement, the procedures the assurance practitioner will perform in a limited assurance engagement will differ from, and are narrower in scope than those performed in a reasonable assurance engagement.
The primary differences between reasonable assurance engagements and limited assurance engagements, in terms of the way the assurance practitioner addresses the assessed risks of material misstatement and the procedures they use, are as follows:
When significant fluctuations, relationships or differences are identified, appropriate evidence in a limited assurance engagement may often be obtained by making enquiries of the entity and considering responses received in the light of known engagement circumstances, without obtaining additional evidence.
In addition, when undertaking analytical procedures in a limited assurance engagement, the assurance practitioner may, for example:
During either a reasonable assurance or limited assurance engagement, the audit team leader's assessment of the risk of material misstatement in the subject matter may change during the course of the engagement. If the auditor becomes aware of a matter or matters that cause the auditor to believe that the risks of a subject matter being materially misstated has changed, the auditor shall design and perform additional procedures to obtain further evidence until the auditor is able to:
This requirement is the same for both a reasonable assurance and limited assurance engagement. ASAE 3000 provides further guidance on how auditors may deal with changes in risks and the need for additional procedures.
The NGER Audit Determination definition of a reasonable assurance engagement is: 'an assurance engagement in which the audit team leader gives an opinion, expressed as a reasonable assurance conclusion, if appropriate in the circumstances of the engagement'.
The table below outlines the differences between the procedures for a reasonable and a limited assurance engagement3:
Sufficient appropriate evidence is obtained as part of a systematic assurance engagement process that includes:
3This guidance is based on the AUASB’s Framework for Assurance Engagements Appendix 1 available on the
Auditing and Assurance Standards Board website.
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