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STANDING ADVISORY GROUP MEETING

1666 K Street, NW Washington, 20006 Telephone: (202) 207-9100 Facsimile: (202)862-8430 This paper was developed by the staff of the Office of the Chief Auditor to foster discussion among the members of the SAG. It is not a statement of the Board; nor does it necessarily reflect the views of the Board or PCAOB staff. STANDING ADVISORY GROUP MEETING REASONABLE ASSURANCE OCTOBER 5-6, 2005 Introduction The Board's interim auditing standards1/ require auditors to obtain reasonable assurance that the financial statements are free of material misstatements to support their unqualified opinion on the financial statements.

STANDING ADVISORY GROUP MEETING statements taken as a whole at an appropriately low level of audit risk. (AU sec. 312.26) Because the auditor must limit overall audit risk to a low level, reasonable assurance must be at a high level. Stated in mathematical terms, if audit risk is 5 percent, then the level of assurance is 95 percent.

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