In: Accounting
An auditor is required to give reasonable level of assurance that the Financial Statements are free from material misstatement and along with that , the financial stateements also comply with Generally Accepted Accounting Principles.
Because of Inherent limitations, an auditor gives reasonable assurance and not absolute assurance.
Following are the inherent limitations which restricts an auditor from giving absolute assurance:-
1) The preparation of financial statements by the management of organization involves many judgements for accounting estimates and provisions etc. , hence the evidences with respect to them can only be pursuasive and not conclusive, hence only reasonable assurance can be obtained.
2) For timely auditing , the auditor needs to perform audit on sampling basis and devotes more time towards risky areas, so there can be scope for some risk due to sampling and hence only reasonable assurance can be obtained.
3) As auditing procedures requires obtaining the information from management also and chances are that the management may not give complete information . Management may be involved in carefully designed fraud .hence only reasonable assurance can be obtained.
Please upvote/thumbs up if the solution was helpful