[finne]

I’m having a lot of trouble keeping these straight. Any guidance would be helpful! I understand what positive vs. negative assurance means, but what exactly does limited assurance entail. How are these terms used for audits, reviews, compilations, examinations, comfort letters? Here’s my understanding so far:

Positive assurance is used for audits because they provide reasonable assurance that there are no material misstatements in the financial statements.

Reviews provide limited assurance that there are no material modifications because the procedures for a review are less in-depth.

But I’m foggy on the rest…

REG - 85
AUD - 99
FAR - 89 - w/ NINJA Audio and Blitz
BEC - 91

Using Wiley - books and test bank - 6 months - all 4 first time

[xdesix]

Negative and Limited assurance actually mean the same thing! You're right, we use Positive assurance when doing an audit. When we're doing reviews, we use Limited/Negative Assurance. For compilations, you provide NO assurance. For reviews, we do Analytical procedures and Inquires. For Compilations, you provide NO assurance, so you pretty much read it to make sure it's all okay, but again, you provide no assurance.

AUD: Passed
BEC: Passed
REG: Studying

[Anonymous]

Positive assurance is when the auditor can state an opinion that the financial statements are presented fairly in conformity with U.S. GAAP (audit work was completed, we are reasonably assured). The opposite is negative assurance, where the auditor is not aware of material misstatements, but we did not do a full audit (usually used in reviews).

Assurance is the level of confidence the auditor has. When an auditor performs a review, they express limited assurance that the financial statements are free of material misstatements. They did not perform an audit, so they cannot issue positive assurance or an opinion on the financial statements. On the other hand, no assurance is provided with a compilation since the auditor is just presenting the financials in statement form.

Comfort letters are written to the underwriters of securities to say it's been a few weeks/months since we have completed a full audit and issued an unmodified opinion, but we will vouch for the client between the date of the last audit report and the registration date. That way, the underwriters/brokers/financial intermediary will feel ‘comfortable' with the gap between the audit and registration of the securities.

[finne]

Thank you for your responses! This helps a lot!

So limited = negative assurance, which is used for reviews. And compilations provide no assurance because those engagements are just for compiling whatever management gives you so you just read over the financial statements to look for glaring errors.

And comfort letters don't really provide any assurance because they just refer the underwriters to the latest financial statements?

What about examinations of prospective financial statements? Would that be considered limited assurance as well? Those procedures mostly include checking for the reasonableness of management's underlying assumptions so I would think it'd be limited assurance.

@ausleaf, good luck on Sunday!!!

REG - 85
AUD - 99
FAR - 89 - w/ NINJA Audio and Blitz
BEC - 91

Using Wiley - books and test bank - 6 months - all 4 first time

[Anonymous]

Thanks! I really hope I pass this time.

At most, the CPA may provide negative assurance in a comfort letter, but that may put the CPA in a bind because they probably have not done audit work (so the fact that the client is even asking for a comfort letter sometimes strains the customer relationship). Here is an article from the AICPA about lenders pressuring auditors to provide comfort letters and the difficulties of providing them.

https://blog.aicpa.org/2013/03/the-dangers-of-providing-client-comfort-letters.html

Regarding examinations of prospective financial statements, the auditor's job is to state if the statements are presented in conformity with the AICPA guidelines. Since prospective financial statements are future projections, I wouldn't think the CPA could offer negative assurance. Maybe someone else can answer that question for us?

[barelystayingsane]

Examinations provide positive assurance. You cannot provide a review (i.e., negative assurance) for prospective financial statements. However, you can perform a review of pro forma financials.

[Anonymous]

Thanks for the clarification, barelystayingsane. I'm glad finne asked the question and it helped me understand the difference.

I found this definition of an examination: “evaluating the preparation of prospective statements, support underlying assumptions, and presentation. The accountant reports whether, in his or her opinion, the statements conform to AICPA guidelines and assumptions provide a reasonable basis for the responsible party's forecast. The accountant should be independent, proficient, plan the engagement, supervise assistants, and obtain sufficient evidence to provide a reasonable basis for the report.”

So, (and someone please correct me if I am wrong) the levels of assurance are audit (positive assurance), review (negative assurance), compilation (no assurance) and then the auditor could provide a comfort letter (possible negative assurance if the auditor feels comfortable providing it). Now I see an examination of prospective financial statements as a totally separate thing. The auditor can provide positive assurance, but only that the statements conform to AICPA guidelines and that the assumptions are reasonable. It's not a full blown audit. Right?

[CanIpassYou Aud]

Thanks. this is very helpful

FAR 75

BEC 75

AUD 65 rematch 01/02/2014

REG 2014

FAR-Passed
BEC-Passed
REG-Passed
AUD-Passed
Materials: Becker+Ninja Notes/Ninja MCQ/Ninja Flashcards
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[nishvik]

Great post .

But can some one please also explain level of assurance ok Agreed Upon Procedures. I believe a diclaimer of opinion is provided with these and results are presented in the form of findings and procedures. Am i right?

Also between Compilations and Agreed upon procedures(AUP) which one provides a higher level of service? And between Review and Agreed upon procedures which one would be considered higher level

Of service?

I believe for Comp and (AUP) — AUP would be higher level as no assurance on compilation.

Between Review and (AUP)— Review would be higher level of service as limited assurance.

Please correct me if I am wrong here. Or any additional inputs

Please give your views on these. Thanks

FAR- 79 -->Becker self study, Final review & Flashcards
REG -72-->Becker ,76-->Becker plus Wiley test bank
AUD- 73 Becker,72-->Becker+Wiley,69-->Added ninja notes,89 --> Added Gleim review
BEC- 84 Becker plus Wiley Test bank

I am Done !!!!

[MdeezCPA]

Great descriptions of the different levels of assurances. Thanks your help!

REG - 74, 77-(Expired), Retake Pending
FIN - 71, 74, 77
BEC - 73, 75-(Expired), 79
AUD - 62, 68, At it again!

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[Author]

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