Question

All of the following are inherent limitations causing the auditor to be unable to obtain absolute assurance that the financial statements are free of material misstatement EXCEPT?

1) the need for professional skepticism
2) the nature of financial reporting
3) the nature of audit procedures
4) the need for the audit to be conducted within a reasonable period of time

Answer 1

The need for professional skepticism is not an inherent limitation for auditors to obtain absolute assurance about financial statements; it is an attitude that enhances the audit process.

Step-by-step explanation:

The student's question is about the inherent limitations that prevent auditors from obtaining absolute assurance that financial statements are free from material misstatement. There are several factors that contribute to this uncertainty:

• Limits of audit procedures due to the innate imperfections in gathering and interpreting data.
• The nature of financial reporting, which involves judgement and estimates that are subjective.
• Timing of the audit, since it must be completed within a reasonable period which may not allow for in-depth examination of all aspects.

The option that does not represent a limitation that would prevent an auditor from obtaining absolute assurance is the need for professional skepticism. Professional skepticism is an attitude that enhances the audit by requiring the auditor to question and critically assess audit evidence, rather than a limitation. Therefore, it improves and facilitates the audit process instead of hindering the assurance.