Reasonable Assurance

Reasonable Assurance

Because auditors use sampling, they provide:

Reasonable assurance, not absolute assurance.

Means: high but not 100% certainty that the financial statements are free from material misstatement.

Reasonable assurance is acceptable in practice, as 100% checking is not practical.

Simple definition

Reasonable assurance is a high, but not absolute, level of assurance that the financial statements are free from material misstatement.

In simple words:

• Auditor gives “high confidence”,
• but not 100% guarantee.

Why not 100%?

Because of:

• Sampling – auditor does not check every single transaction.
• Limitations of internal control – controls can fail, people can collude.
• Use of judgment – estimates, assumptions (e.g. bad debts, provisions).
• Time and cost limits – cannot audit forever.

So, the auditor’s job is to reduce audit risk to a low level, and then give reasonable assurance, not absolute certainty.

Exam-style answer (short)

Reasonable assurance is the level of assurance obtained by the auditor as a result of performing an audit, which is high but not absolute, that the financial statements as a whole are free from material misstatement, whether due to fraud or error.