Your colleague asked you to explain to him what a reasonable assurance engagement is. Which option below represents the correct explanation of a reasonable assurance engagement?

1 A reduction in assurance engagement risk to a level that is acceptable in the circumstances of the engagement, but where that risk is greater than for a reasonable assurance engagement; a positive form of expression of the practitioner’s conclusion.

2 A reduction in assurance engagement risk to an acceptably low level; a positive form of expression of the practitioner’s conclusion; sufficient appropriate evidence is gathered as part of a systematic engagement process; the auditor gives reasonable assurance regarding the fair presentation of the financial statements.

3 A reduction in assurance engagement risk to an acceptably low level; a positive form of expression of the practitioner’s conclusion; procedures for gathering sufficient appropriate evidence are deliberately limited.

4 A reduction in assurance engagement risk to an acceptably low level; a positive form of expression of the practitioner’s conclusion; sufficient appropriate evidence is gathered as part of a systematic engagement process; a moderate level of assurance is given.