ACCA Advanced Audit and Assurance (AAA) Practice Exam

In the context of an audit, what does reasonable assurance imply?

1. High level of confidence with a negative expression

2. Comprehensive verification of every financial transaction

3. High level of confidence with a positive expression

4. Minimal verification techniques employed

The correct answer is: High level of confidence with a positive expression

Reasonable assurance in the context of an audit means that the auditor has obtained a high level of confidence that the financial statements are free from material misstatement. This assurance is expressed positively, indicating that, based on the procedures and evidence gathered during the audit, the auditor believes that the financial statements present a true and fair view of the company's financial position and performance. This level of assurance does not imply that the auditor guarantees the absolute accuracy of the financial statements, nor does it constitute a full guarantee against fraud or error. Instead, it reflects the auditor's assessment that, while there is still some risk of material misstatement, that risk is low enough to provide a reasonable basis for the auditor's opinion. Other options, while touching on aspects of audit assurance, do not accurately describe reasonable assurance. A negative expression would suggest a lack of confidence, while comprehensive verification of every transaction is not practical or necessary in the context of an audit, as auditors use sampling techniques to draw conclusions about the financial statements. Minimal verification techniques would indicate a lack of thoroughness, which does not align with the expectations of an audit providing reasonable assurance.