ACCA Audit and Assurance (F8) Practice Exam

In which scenario is a limited assurance engagement appropriate?

1. For financial statements requiring extensive review

2. When a full statutory audit is not required

3. Only for high-risk entities

4. For compliance audits only

The correct answer is: When a full statutory audit is not required

A limited assurance engagement is suitable in scenarios where a full statutory audit is not mandated. This type of engagement provides a moderate level of assurance to users that the financial information is free from material misstatement. Unlike a full audit that involves extensive testing and requires an opinion based on a comprehensive examination of the financial statements, a limited assurance engagement typically entails fewer procedures and a more focused review. In situations where a complete audit is not necessary — perhaps due to the size of the entity, regulatory requirements, or stakeholder needs — limited assurance can effectively meet the requirements for credibility in financial reporting without the resource intensity of a full audit. This makes it particularly appropriate for smaller businesses or less complex financial statements that do not pose significant risk to users. The other scenarios presented suggest various needs for assurance that either do not align with the characteristics of limited assurance or are not restricted solely to this type of engagement.