Easy2 marksMultiple Choice

Audit Framework and RegulationAssurance EngagementsFramework

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SECTION A - CASE 1: AQUAPURIFY NGO

AquaPurify NGO is a global charity providing clean water infrastructure in developing nations. You are the audit manager at Grant & Co. The audit for the year ended 31 March 20X6 is being planned. The audit engagement partner, Sarah Jenkins, has been on the engagement for seven years. AquaPurify recently received a massive government grant that requires a separate assurance report. The charity's finance director, a former Grant & Co audit manager who left the firm 18 months ago, has offered the audit team a complimentary luxury safari trip 'as a thank you for their hard work'. Furthermore, Grant & Co has been asked to provide internal audit services to AquaPurify.

Which of the following correctly identifies the ethical threat created by Sarah Jenkins serving as the engagement partner for seven years, and the appropriate safeguard?

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ACCA · Question 05 · Audit Framework and Regulation

SECTION A - CASE 1: AQUAPURIFY NGO

AquaPurify NGO is a global charity providing clean water infrastructure in developing nations. You are the audit manager at Grant & Co. The audit for the year ended 31 March 20X6 is being planned. The audit engagement partner, Sarah Jenkins, has been on the engagement for seven years. AquaPurify recently received a massive government grant that requires a separate assurance report. The charity's finance director, a former Grant & Co audit manager who left the firm 18 months ago, has offered the audit team a complimentary luxury safari trip 'as a thank you for their hard work'. Furthermore, Grant & Co has been asked to provide internal audit services to AquaPurify.

Regarding the separate assurance report for the government grant, which of the following best describes the difference between reasonable assurance and limited assurance?

Answer options:

Reasonable assurance provides absolute certainty, whereas limited assurance provides a high level of assurance.

Reasonable assurance provides a high level of assurance expressed positively, whereas limited assurance provides a lower level of assurance expressed negatively.

Reasonable assurance is expressed negatively, whereas limited assurance is expressed positively.

There is no difference in the level of assurance, only in the format of the report.

How to approach this question

Distinguish between the two main types of assurance engagements based on the level of assurance and the form of conclusion.

Full Answer

B.Reasonable assurance provides a high level of assurance expressed positively, whereas limited assurance provides a lower level of assurance expressed negatively.✓ Correct

Reasonable assurance (like a statutory audit) involves gathering sufficient appropriate evidence to conclude positively that the subject matter conforms to criteria (a high level of assurance). Limited assurance (like a review engagement) involves fewer procedures and concludes negatively ('nothing has come to our attention that causes us to believe...'), providing a lower, meaningful level of assurance.

Common mistakes

Believing reasonable assurance means 'absolute' assurance.

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Practice the full ACCA AA — Audit and Assurance Practice Exam 2

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