What does level of assurance mean on the CPA exam?
Level of assurance. How much confidence the practitioner expresses. An audit gives reasonable assurance, a review limited assurance, and a compilation and agreed-upon procedures none at all.
Defined against AU-C 200.05.
Which CPA exam sections use level of assurance?
Level of assurance appears in the AUD section of the CPA exam.
Other terms defined against AU-C 200
- applicable financial reporting framework: The framework management adopts for the statements, such as GAAP or a special purpose framework.
- control risk: The risk that the entity's own controls will not prevent, or detect and correct, a material misstatement on a timely basis.
- inherent risk: The susceptibility of an assertion to material misstatement before any control is considered.
- professional skepticism: An attitude that includes a questioning mind and a critical assessment of evidence.
- risk of material misstatement: The risk that the statements are materially misstated before the audit begins.
Related terms
- agreed-upon procedures: An engagement where the practitioner performs procedures the parties have specified and reports the findings, expressing no opinion.
- internal control over financial reporting: A process designed to provide reasonable assurance regarding the preparation of reliable financial statements.
- substantial authority: The standard between reasonable basis and more likely than not: roughly a 40 percent chance, judged on the weight of published authorities rather than on the preparer's confidence.
- required supplementary information: Schedules a government must present outside the basic statements, such as budgetary comparisons and pension trend data.
- audit sampling: Selecting and evaluating less than 100% of a population of audit relevance so the sample is expected to be representative, giving a reasonable basis for conclusions about the whole population.
- risk assessment procedures: The audit procedures designed and performed to identify and assess the risks of material misstatement at the financial statement and assertion levels.