Week 2 - Limitations of Assurance

Question 1

What is the first limitation of assurance?

Answer 1

Cannot give complete assurance - can only do sample testing and therefore may miss a trick

Question 2

What is the second limitation of assurance?

Answer 2

There are some subjective judgements, by both auditor and client, so cannot give 100% assurance

Question 3

What is the third limitation of assurance?

Answer 3

Look at financial statements that are historic in nature - doesn’t help with future projects
- historic cost basis - not current costs

Question 4

What is the fourth limitation of assurance?

Answer 4

Do not oversee the building of financial statements - don’t know how many errors there are, only see client periodically, unlike internal auditors (hence why we rely on their work)

Question 5

What is the fifth limitation of assurance?

Answer 5

Reliance on systems - inherent limitations e.g faults in the system

Question 6

What is the sixth limitation of assurance?

Answer 6

Persuasive v conclusive evidence - we never get/give conclusive evidence

Question 7

What is the seventh limitation of assurance?

Answer 7

If there is collusion between client staff - fraud taking place that is harder to detect

Question 8

What is the eight limitation of assurance?

Answer 8

Reliance placed on client where we can’t verify info - not everything has a supporting document

Question 9

What is the ninth limitation of assurance?

Answer 9

Use of estimates made by client