Levels of Assurance

 Levels of Assurance

“Assurance” means self-belief with which a practitioner convey in his termination.

Assurance include trustworthiness in financial statements. However level of trustworthiness depends on type of declaration supplier.

Levels/Types of Assurance:

There are 3 levels/types of assurance i.e.

 

1.Absolute Assurance 

It is a ideal rank of assurance. Sensible Assurance (also called High Rank or optimistic Assurance).

 

 It is a high but not utter stage of assurance which is expressed in optimistic form of termination e.g.

                          

2.Narrow Assurance

Narrow Assurance(also called Modest stage or Unenthusiastic Assurance).

 It is a modest stage of assurance which is articulated in unconstructive form of termination e.g.

“Stand on our analysis, nothing has come to our awareness that source us to consider that financial statements do not give a exact and fair-haired view”.

Why supreme assurance cannot be supply? Auditor cannot make available supreme assurance.

Because audit risk cannot be compact to Zero due to intrinsic restrictions of assurance/audit.

 

Following are the intrinsic boundaries

 

    1.Nature of Financial Statements

There is frequently improbability / decision / approximation/ forecasting caught up in training of monetary statements and some region cannot be precisely considered/verified e.g.

Terms for awful amount overdue, Downgrading, Result of legal cases, Guarantee operating cost, insubstantial assets.

2. 2.Weaknesses in Internal Control

Entity’s inner control organization over monetary statements always has some fault/restrictions e.g. because of human mistake.

3. 3.Nature of Audit Procedures

Many of the auditor’s events are stand on his decision. Therefore, most of the audit confirmation is influential quite than decisive.

4. 4.Time and Cost Limitation

   Because of moment in time and rate limitation, auditor checks only a sample of contact.

   Audit is not a fraud-examination i.e. audit events may not notice a difficult and with awareness planned scam.

5. Management may not supply complete information to auditor.

6. Auditor does not have exact legal power e.g. power to explore.