Limited assurance engagement is also known as review engagement or negative engagement. This kind of engagement is not the same as a reasonable assurance engagement. Usually, if the auditors use this engagement, they will perform less review and procedures to support their conclusion on the financial statements (Also see Introduction to Financial Statements) . Then, they will conclude whether they have noticed anything which shows that the company did not prepare their financial statements based on specific accounting standards.
As the name of this engagement suggests, the level of assurance that this type of engagement provides is limited due to the procedures that the auditors perform to review their customer’s financial statements.
Under normal conditions, the audit opinion will be a negative assurance (Also see The Differences Between Audit and Assurance) opinion in limited assurance engagement. This indicates that the auditors discovered nothing that is not true and fair when they are reviewing the financial statements. However, if they are unable to acquire enough supporting documents that can support their opinions, then they should issue a qualified opinion (Also see Audit – Introduction to Unqualified Opinion) or a disclaimer opinion.
Example:
An excellent example of the limited assurance engagement is the engagement between an external audit firm in Johor Bahru and its customer. The audit firm needs to review the financial statements (Also see Essential Processes in the Audit of Financial Statements) of its customer.
Under normal conditions, the auditors will perform fewer procedures when they audit the financial statements in the limited assurance engagement. The assurance they provide to the statements is limited too.
If the auditors did not find any material misstatement, they would issue an opinion which states that nothing has come to their attention that shows the company is not preparing or presenting their financial statements in a true and fair view in all material respects at the end of the engagement.
An agreed-upon procedure is another example of a limited assurance engagement. Typically, agreed-upon procedures (AUP) engagement occurs when the customer wants the auditors to review certain parts of their financial statements according to the procedures they have set.