## Audit vs Review vs Assurance vs Related Services

### The Assurance Hierarchy

```

ASSURANCE SERVICES (on Historical FS):

High (not absolute) assurance → AUDIT → SA (Standards on Auditing)

Moderate (not high) assurance → REVIEW → SRE (Standards on Review Engagements)

ASSURANCE SERVICES (not on Historical FS):

Moderate assurance → ASSURANCE → SAE (Standards on Assurance Engagements)

NON-ASSURANCE SERVICES:

No assurance → RELATED SERVICE → SRS (Standards on Related Services)

```

### Audit vs Review — Comparison

Feature	Audit	Review
Engagement type	Reasonable assurance	Limited assurance
Level of assurance	High (not absolute)	Lower than audit
Procedures	Extensive; gathers full SAAE	Fewer procedures; limited conclusions
Subject matter	Historical financial statements	Historical financial statements

### Reasonable vs Limited Assurance

Feature	Reasonable Assurance	Limited Assurance
Assurance level	High	Lower than reasonable
Procedures	Elaborate and extensive	Fewer procedures
Conclusion drawn	Reasonable conclusion on SAAE	Limited conclusion
Example	Audit	Review

### Prospective Financial Information (PFI)

PFI = financial information based on assumptions about future events (forecast, projection, or combination)
Evidence supporting PFI assumptions is itself future-oriented — inherently uncertain
Auditor cannot opine on whether projected results will be achieved
Practitioner verifies: (a) assumptions are not unreasonable, (b) presentation is proper, (c) material assumptions are disclosed
Provides only moderate assurance (governed by SAE)

Worked example

### Example 1

CA firm A audits the annual accounts of XYZ Ltd. → Audit engagement (SA) → Reasonable/High assurance. CA firm B is asked to review the same company's half-yearly accounts → Review engagement (SRE) → Limited/Moderate assurance. Same company, different engagement types, different levels of assurance.

### Example 2

A startup preparing a 5-year revenue projection for Series B investors asks a practitioner to examine it. The practitioner cannot confirm the projections will be achieved — they can only give moderate assurance that management's assumptions are not unreasonable. This is a PFI engagement under SAE, not an audit under SA.

⚠️ Common exam mistakes

Saying review provides 'no assurance' — review provides limited (moderate) assurance, just lower than audit
Thinking SRS (Related Services) engagements provide some level of assurance — they provide NO assurance whatsoever
Confusing SAE (assurance on non-historical matters) with SRE (review of historical financial statements)
Saying an auditor can confirm that projected results in a PFI will be achieved — they can only verify that assumptions are not unreasonable

Reference:

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Audit vs Review vs Assurance vs Related Services — The Assurance Hierarchy

Worked example

⚠️ Common exam mistakes