Learning objective
Explain why a balancing trial balance is not evidence that the financial statements are right, distinguish audit from review, agreed-upon procedures and compilation, and state who is responsible for what.
Key takeaways
- A balancing trial balance proves only that the arithmetic works.
- Five families of error keep a trial balance balanced: recorded twice, never recorded, wrong account, wrong period, wrong amount.
- Audit, review, agreed-upon procedures and compilation give different levels of assurance.
- Management prepares the financial statements; the auditor forms and reports an opinion.
- Reasonable assurance is high but never absolute.
Practice exercise
Pick any set of accounts you have worked with and write down two errors that would leave the trial balance perfectly balanced.
Practical educational training only. Not a professional qualification, audit licence or accredited certification. Prepared on 19 September 2026 — verify current requirements with a qualified professional.