A newly promoted chief audit executive (CAE) is faced with a backlog of assurance engagement reports to review for approval. In an attempt to attach…

Question breakdown

Tests

Distinguish types of engagement opinions and their reliance levels

Difficulty

Hard

Key idea: Opinions that give positive or graded assurance, or that third parties will rely on, carry the most reliance and risk, so they deserve CAE review before negative or limited assurance opinions.

How to reach the answer

1. Rank each opinion type by the level of assurance it gives and the reliance others will place on it.
2. A graded positive opinion states affirmatively how effective controls are, which is high reliance.
3. A third-party opinion may be relied on by external parties, which raises exposure.
4. Negative assurance opinions ('nothing came to our attention') and limited assurance opinions give lower assurance from narrower work, so they get the lowest priority.

Each option

• AIncorrect. The graded positive opinion is high-assurance and should be reviewed early, so this pairing is wrong.
• BIncorrect. Both graded positive and third-party opinions carry high reliance and warrant higher review priority.
• CCorrect. Negative assurance and limited assurance opinions give the lowest level of assurance and therefore the lowest review priority.
• DIncorrect. The third-party opinion may be relied on externally, so it should not be in the lowest-priority group.

Common trap: Candidates may read 'negative' as meaning bad findings that need urgent attention, when it actually describes a low level of assurance.

In practice: A CAE triaging report approvals focuses scrutiny on reports that make strong affirmative statements or will be relied on by boards, regulators or other external parties.

Remember: The more assurance an opinion gives and the more others rely on it, the higher its CAE review priority; negative and limited assurance rank lowest.

Drafted with AI assistance and checked against the answer key.