Reasonable assurance
The objective of an assurance engagement is to obtain sufficient appropriate evidence to express a conclusion, providing reasonable or limited assurance, as to whether the audited body has complied with the specified requirements of the appropriate legislation (the ‘criteria’) in all material respects. The higher the level of assurance provided, the greater the confidence the individual can place in the matter being assured. However, for an audit team leader to provide a higher level of assurance, they need to reduce the risk of a material misstatement in the matter being audited. The audit team leader achieves this by conducting a more in-depth and rigorous assessment of the audited matter. Absolute assurance means that there is no assurance risk. Reducing assurance risk to zero is rarely attainable or cost-beneficial, primarily because the evidence available to an audit team leader is persuasive rather than conclusive. Audit team leaders must use judgment to gather and evaluate assurance evidence. As such, absolute assurance is not part of the NGER Audit Determination. The NGER Audit Determination’s definition of a reasonable assurance engagement is as follows: 'A reasonable assurance engagement means an assurance engagement in which the audit team leader gives an opinion, expressed as a reasonable assurance conclusion, if appropriate in the circumstances of the engagement.'
Because the level of assurance obtained in a limited assurance engagement is lower than in a reasonable assurance engagement, the procedures the assurance practitioner will perform in a limited assurance engagement will differ from and are narrower in scope than those performed in a reasonable assurance engagement[Clean Energy Regulator]. When conducting an audit of financial statements, the high-level objectives of the auditor include obtaining reasonable assurance as to whether a client’s financial statements are free from material misstatement, thereby allowing the auditor to express an opinion on whether the financial statements are presented fairly, in all material respects, by the applicable financial reporting framework (such as generally accepted accounting principles)[AccountingTools].
Levels of assurance explained. Clean Energy Regulator. Retrieved from: https://www.cleanenergyregulator.gov.au/Infohub/Audits/Pages/Forms%20and%20resources/Audit%20determination%20handbook/Levels-of-assurance-explained.aspx.
Reasonable assurance definition. AccountingTools. Retrieved from: https://www.accountingtools.com/articles/reasonable-assurance