Certain audit engagements require the auditor to give limited assurance at the end of the engagement. This is true when the auditor is asked to make a review.
Definition of Limited Assurance
Limited assurance means an average or moderate assurance expressed by an auditor in a negative form. It arises because the auditor cannot give a more than average (reasonable) assurance on the audit.
Limited assurance is a moderate assurance an auditor provides concerning an audit. It is an average assurance of non-financial information made available to the practitioner. It is provided when there is not enough audit evidence for the examination.
As a result, the auditor will give a negative audit report. Negative form expression can be stated in this form: “based on our review, nothing has come to the attention that causes us to believe that the accompanying do not give a true and fair view.”
However, most limited assurance reports are not provided in financial statement audits. It is used when the auditor performs another type of assurance service referred to as reviews. In review, the practitioner is not required to comply with the generally accepted audit principles. An example of a review is when an entity requests an auditor to review its cash flow forecast.
Here, the cash flow forecast is based on future events and there is no audit evidence to back it up. So, the auditor is left with no choice but to provide a moderate assurance regarding the cash flow forecast. A review may also be done in a particular aspect of an entity’s financial statement. And this will result in a limited assurance audit report.
Finally, an auditor gives limited assurance to show that nothing is wrong with the auditor or accountant is not aware of. And the financial statement does contain material misstatements that may affect the credibility of the financial report. However, because there was not enough audit evidence to back it up, a moderate audit opinion is provided in the audit report.
Limited assurance is an audit opinion expressed in a negative form. It is stated when a practitioner is providing a review on part of the financial statement or other issues. Such reports mean that the auditor, although not having enough evidence, believes that the examination of the entity does not result in any material misstatement.