tuation No2 Fundamental Principlest or each of the items bel

tuation No.2: Fundamental Principlest or each of the items below, indicate through the appropriate letter the rinciple to which the item is most closely related. A. Responsibilities principle B. Performance principle C. Reporting principle An indication that an opinion cannot be expressed. . Auditors\' assessment of the risk ofmaterial misstatement. A. Determining and applying an appropriate materiality level. 5. Expressing an opinion in accordance with the auditor\'s findings. __ 6. An auditors\' overall conclusion of the fairness of the client\'s financial 7. The requirement that auditors possess the skills and knowledge of others in the profession. 8. The use of an audit plan to identify audit procedures to be performed during the engagement -. Accounting firm policies with respect to the level of expected continuing professional education. _10. Auditor\'s requests to obtain bank statements directly from financial institutions with whom the client does business. Define reasonable assurance. How does the audit team provide reasonable assurance in the engagement?

Solution

1-A

2-C

3-B

4-B

5-C

6-C

7-A

8-B

9-A

10-B

2

Management\'s assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance,

Reasonable assurance includes the understanding that there is a remote likelihood that material misstatements will not be prevented or detected on a timely basis. Although not absolute assurance, reasonable assurance is, nevertheless, a high level of assurance.

‘Reasonable assurance’ is the level of confidence that the financial statements are not materially misstated that an auditor, exercising professional skill and care, is expected to attain from an audit.

An auditor cannot attain absolute confidence because of numerous factors arising, among other things, from the limitations of audit evidence, the impracticality of examining all evidence and uncertainties as to the future.

The confidence that an auditor attains is subjective and is the basis for offering an audit opinion. Users of financial statements derive their own confidence in the audited financial statements from many sources, including a knowledge that the auditors work to professional standards within a framework of regulation and that the auditors have felt sufficiently confident that the financial statements are not materially misstated to issue an opinion.

As a consequence of their confidence that financial statements are not materially misstated, users of financial statements may also gain confidence that the management of the entity are conducting its affairs in the knowledge that the financial consequences of their actions will be reported.

A reduction in assurance engagement risk to an acceptably low level in the circumstances of the assurance engagement, as the basis for a positive form of expression of the auditor’s conclusion. Reasonable assurance means a high but not absolute level of assurance.

Sufficient appropriate evidence is obtained as part of a systematic assurance engagement process that includes:

obtaining an understanding of the assurance engagement circumstances

assessing risks

responding to assessed risks

performing further evidence gathering procedures, and

Evaluating the evidence obtained.