The Public Company Accounting Oversight Board states that reasonable assurance allows a:
A) small likelihood of ineffective internal controls.
B) remote likelihood that material misstatements will not be prevented or detected by internal control.
C) likelihood that material misstatements will not be prevented or detected by internal control.
D) high likelihood that material misstatements will not be prevented or detected by internal control.

Question

Quizplus · Accepted Answer

Reasonable assurance does not mean eliminating all risk, but rather providing a high level of assurance that material misstatements will be prevented or detected. Option B correctly states that the likelihood of material misstatements not being prevented or detected by internal control is remote, which is an acceptable level of risk. Options A and D either overestimate or underestimate the level of risk, while option C incorrectly suggests that reasonable assurance allows for a high likelihood of material misstatements.

The Public Company Accounting Oversight Board States That Reasonable Assurance