What is the difference between reasonable assurance and limited assurance?

What is the difference between reasonable assurance and limited assurance?
A . Reasonable assurance is provided by external auditors as part of a financial audit and indicates conformity to suitable criteria and freedom from material error, while limited assurance results from reviews, compilations, and other activities performed by competent personnel who are sufficiently objective about the subject matter.
B . Reasonable assurance is provided by internal auditors as part of a risk assessment, while limited assurance results from external audits and regulatory examinations.
C . Reasonable assurance is provided by the Board of Directors as part of governance activities, while limited assurance results from employee self-assessments.
D . Reasonable assurance is provided by management as part of strategic planning, while limited assurance results from operational reviews and performance evaluations.

View Answer

Answer: A

Explanation:

The primary distinction between reasonable assurance and limited assurance lies in the level of confidence and the scope of procedures performed.

Reasonable Assurance:

Provides a high level of confidence that the subject matter is free from material misstatement.

Typically offered in external audits, such as financial audits, where auditors perform extensive procedures to validate conformity with established criteria.

Limited Assurance:

Offers a moderate level of confidence based on less rigorous procedures (e.g., inquiries and analytical reviews).

Common in reviews and compilations, often performed by internal or external personnel with sufficient expertise.

Key Differences:

Reasonable assurance requires more evidence and detailed testing.

Limited assurance is less comprehensive but still provides an informed opinion.

Reference: International Auditing Standards (ISA 200): Explains assurance levels and their requirements.

COSO Framework: Highlights the application of assurance in governance and risk management.