Question

Auditing standards indicate that reasonable assurance is a moderate, but not absolute, level of

assurance that the financial statements are free of material misstatement.
A) True
B) False

Answer 1

The statement is true; reasonable assurance is a high level of assurance that auditors aim for, acknowledging that absolute assurance is not possible due to various inherent limitations in the audit process.

Step-by-step explanation:

The statement that auditing standards indicate that reasonable assurance is a moderate, but not absolute, level of assurance that the financial statements are free of material misstatement is true.

In the context of an audit, reasonable assurance is the level of certainty that an auditor seeks to attain to ensure that the financial statements under review do not contain any material misstatements that could affect the decisions of users.

However, it is important to recognize that absolute assurance is not attainable due to factors such as the inherent limitations of an audit, the nature of evidence, and the need for the audit to be conducted within a reasonable time frame and cost.

Auditing standards indicate that reasonable assurance is a moderate, but not absolute, level of assurance that the financial statements are free of material misstatement.