Australian Dental Council (ADC) Practice Test

Why does an independent financial statement audit provide reasonable assurance rather than absolute assurance?

Because auditors are permitted to ignore immaterial fraud Because management, rather than the auditor, selects the financial reporting framework Because an audit opinion covers only transactions selected by management Because inherent limitations such as judgment, sampling, and the nature of audit evidence prevent elimination of audit risk

Correct Answer:

Because inherent limitations such as judgment, sampling, and the nature of audit evidence prevent elimination of audit risk

Explanation:

Audits have inherent limitations arising from judgment, sampling, persuasive rather than conclusive evidence, and the possibility of sophisticated collusion or management override. Therefore, audit risk can be reduced to an acceptably low level but not eliminated.

Access more questions from this quiz

Continue to Australian Dental Council (ADC) Practice Test for more practice questions and the full quiz experience.

Access More Questions