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Microlesson · 5-min read

Reasonable Assurance (Audit) vs Limited Assurance (Review)

## Reasonable Assurance vs Limited Assurance

Both Audit (reasonable assurance) and Review (limited assurance) are performed on historical financial information — economic events that have already occurred, expressed in financial terms (e.g., sales, purchases, closing balances).

### Comparison

FeatureReasonable Assurance (Audit)Limited Assurance (Review)
Level of AssuranceHighLower than audit
ProceduresAll six procedure types (detailed)Primarily Inquiry + Analytical Procedures
EvidenceSufficient Appropriate Audit Evidence (extensive)Sufficient Appropriate Evidence (less extensive)
Conclusion LanguagePositive"In our opinion…"Negative"Nothing has come to our attention…"
Report OutputAudit ReportReview Report
Typical Use CaseAnnual statutory auditQuarterly interim financial statements

### Practical Context: Listed Companies and Quarterly Reporting

A listed company (FY: April–March) has the option to publish unaudited quarterly financials. At each quarter end, a Limited Review is conducted:

```

Q1 (Apr–Jun 2025) → Limited Review at 30 Jun

Q2 (Jul–Sep 2025) → Limited Review at 30 Sep

Q3 (Oct–Dec 2025) → Limited Review at 31 Dec

Q4 / Full Year → Statutory Audit (Reasonable Assurance)

```

### Memory Aid

  • Audit = Detailed procedures → High assurance → Positive language
  • Review = Inquiry + Analytical → Lower assurance → Negative language ("nothing came to our attention")

Worked example

### Example 1

Limited Review (Q3 end): A listed company ends Q3 on 31 December 2025. The CA performs a limited review: inquires with CFO about unusual revenue spikes, compares Q3 revenue with Q3 of prior year (analytical procedure). Report states: 'Nothing has come to our attention that causes us to believe these financial statements do not present fairly…'negative assurance language.

### Example 2

Annual Audit: The same company's full-year audit (FY ending 31 March 2026) involves physical verification of inventory, debtor confirmations, bank reconciliations, and substantive testing of all major accounts. The auditor concludes: 'In our opinion, the financial statements give a true and fair view…'positive assurance language.

⚠️ Common exam mistakes

  • Using positive assurance language ('In our opinion') in a review report — review conclusions are always expressed using negative assurance language
  • Thinking 'limited assurance' means the practitioner is less careful or competent — the care is identical, but procedures are fewer by design
  • Forgetting that both audit and review are performed only on historical financial information — neither is appropriate for future projections
  • Confusing 'lower level of assurance' with 'lower quality report' — they serve different purposes; the level matches the depth of procedures performed
Reference: — SA 700 series (Audit Opinion); SRE 2400/SRE 2410 (Review Engagements)
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