ACCA Advanced Audit and Assurance (AAA) Practice Exam

What is the main goal of a review engagement?

1. To provide absolute assurance on financial statements

2. To obtain limited assurance regarding material misstatement

3. To conduct a comprehensive audit

4. To evaluate the effectiveness of an internal control system

The correct answer is: To obtain limited assurance regarding material misstatement

The main goal of a review engagement is to obtain limited assurance regarding material misstatement in financial statements. In a review engagement, the auditor performs analytical procedures and inquiries to assess whether the financial statements are plausible within the context of the financial reporting framework. This process allows the auditor to express limited assurance, meaning that there is not enough substantive testing to reduce the risk of material misstatement to a low level, as would be the case in a full audit. This limited assurance is appropriate for entities that may not require a full audit but still need some level of financial statement oversight. The key aspect of a review engagement lies in its scope and approach; it does not involve extensive testing or verification of transactions or controls, which is more characteristic of an audit. Furthermore, while internal control evaluations can be part of overall engagements, they are not the primary focus of a review engagement, which primarily aims to assess financial statement accuracy and reliability at a high level.