ACCA Advanced Audit and Assurance (AAA) Practice Exam

What does a review engagement provide to the practitioner?

1. A thorough investigation into the financials

2. A higher degree of assurance than an audit

3. Limited assurance on the absence of material misstatement

4. The ability to act as an external consultant only

The correct answer is: Limited assurance on the absence of material misstatement

A review engagement is designed to provide limited assurance regarding the financial statements of an entity. The practitioner conducts analytical procedures and inquiries rather than performing extensive testing as in an audit. This process leads to the conclusion that nothing has come to the practitioner's attention that would indicate the financial statements are materially misstated. Therefore, the outcome of a review engagement can be understood as providing limited assurance on the absence of material misstatement. This kind of engagement is less comprehensive than an audit, which requires a deeper investigation (making option A unsuitable) and involves a higher degree of assurance (making option B incorrect). Furthermore, a review engagement does not solely serve to provide consulting services; its primary function is to assess financial statements, which makes option D irrelevant in the context of the assurance provided.