Answer to Question #193646 in Economics for Victor Campbell

Question

Discuss two reasons why the auditor’s work is deemed to provide reasonable assurance, but not absolute assurance to shareholders?

Answer 1

Auditors are unable to obtain absolute assurance not because they conduct engagements with insufficient care, but because limitations inherent in the process restrict the ability to guarantee absolute assurance.

Absolutes are not attainable due to factors such as the need for professional judgment, the use of testing, the inherent limitations of internal control, the reliance in accounting on estimates, and the fact that audit evidence is generally persuasive rather than conclusive.