Definition
Reasonable assurance is a high level of assurance, but it is not absolute assurance. An audit under AU-C 200 and an examination under AT-C 205 both provide it. The auditor or practitioner gathers sufficient appropriate evidence to reduce the risk of an incorrect opinion to an acceptably low level, and states a positive opinion. Absolute assurance is not attainable because of the inherent limits of testing, judgment and controls.
Why it matters in an audit or review
The assurance level drives the nature and extent of procedures. Reasonable assurance generally needs an understanding of internal control, risk assessment and tests that respond to assessed risk. Users who read a SOC 2 Type 2 opinion or an audit opinion should know it is high assurance, not a guarantee that no fraud or error exists.
Example
Illustrative: an auditor tests a sample of 60 sales invoices and finds none with errors. The auditor concludes only that the risk of material misstatement in sales is acceptably low, not that every invoice is correct.
Common mistakes
- Reading reasonable assurance as a guarantee.
- Using the phrase in a limited assurance report.
Sources
- AICPA, AU-C Section 200, Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance With Generally Accepted Auditing Standards
- AICPA, AT-C Section 205, Assertion-Based Examination Engagements
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error