Which financial statements provide the greatest level of assurance?

Which financial statements provide the greatest level of assurance?

• A. Compiled financial statements
• B. Reviewed financial statements
• C. Audited financial statements
• D. Unaudited financial statements

Answer: (C)

Audited financial statements provide the greatest level of assurance because an independent auditor conducts extensive procedures to gather sufficient, appropriate evidence and then issues an opinion that the statements are fairly presented in accordance with the applicable financial reporting framework. This independence and the depth of testing—documentary evidence, confirmations, tests of transactions and controls, and other procedures—give a high, reasonable level of confidence. In contrast, compiled statements involve no assurance beyond presenting information, a reviewed engagement uses inquiry and analytical procedures with only limited assurance, and unaudited statements have no assurance at all.

Audited financial statements provide the greatest level of assurance because an independent auditor conducts extensive procedures to gather sufficient, appropriate evidence and then issues an opinion that the statements are fairly presented in accordance with the applicable financial reporting framework. This independence and the depth of testing—documentary evidence, confirmations, tests of transactions and controls, and other procedures—give a high, reasonable level of confidence. In contrast, compiled statements involve no assurance beyond presenting information, a reviewed engagement uses inquiry and analytical procedures with only limited assurance, and unaudited statements have no assurance at all.